Correlation Between Ab Value and International Equity
Can any of the company-specific risk be diversified away by investing in both Ab Value and International Equity at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Ab Value and International Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ab Value Fund and International Equity Index, you can compare the effects of market volatilities on Ab Value and International Equity and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Ab Value with a short position of International Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Value and International Equity.
Diversification Opportunities for Ab Value and International Equity
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between ABVCX and International is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Ab Value Fund and International Equity Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Equity and Ab Value is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Ab Value Fund are associated (or correlated) with International Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Equity has no effect on the direction of Ab Value i.e., Ab Value and International Equity go up and down completely randomly.
Pair Corralation between Ab Value and International Equity
Assuming the 90 days horizon Ab Value Fund is expected to generate 1.04 times more return on investment than International Equity. However, Ab Value is 1.04 times more volatile than International Equity Index. It trades about 0.44 of its potential returns per unit of risk. International Equity Index is currently generating about -0.16 per unit of risk. If you would invest 1,928 in Ab Value Fund on September 3, 2024 and sell it today you would earn a total of 148.00 from holding Ab Value Fund or generate 7.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 85.0% |
| Values | Daily Returns |
Ab Value Fund vs. International Equity Index
Performance |
| Timeline |
| Ab Value Fund |
| International Equity |
Ab Value and International Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ab Value and International Equity
The main advantage of trading using opposite Ab Value and International Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Value position performs unexpectedly, International Equity can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in International Equity will offset losses from the drop in International Equity's long position.| Ab Value vs. Vanguard Value Index | Ab Value vs. Dodge Cox Stock | Ab Value vs. American Funds American | Ab Value vs. American Funds American |
| International Equity vs. Vanguard Windsor Fund | International Equity vs. Volumetric Fund Volumetric | International Equity vs. Commonwealth Global Fund | International Equity vs. Ab Value Fund |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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