Correlation Between Applied Finance and Ab Small
Can any of the company-specific risk be diversified away by investing in both Applied Finance and Ab Small 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 Applied Finance and Ab Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Finance Explorer and Ab Small Cap, you can compare the effects of market volatilities on Applied Finance and Ab Small 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 Applied Finance with a short position of Ab Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Finance and Ab Small.
Diversification Opportunities for Applied Finance and Ab Small
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Applied and SCYVX is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Applied Finance Explorer and Ab Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Small Cap and Applied Finance 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 Applied Finance Explorer are associated (or correlated) with Ab Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Small Cap has no effect on the direction of Applied Finance i.e., Applied Finance and Ab Small go up and down completely randomly.
Pair Corralation between Applied Finance and Ab Small
Assuming the 90 days horizon Applied Finance Explorer is expected to generate 1.28 times more return on investment than Ab Small. However, Applied Finance is 1.28 times more volatile than Ab Small Cap. It trades about 0.06 of its potential returns per unit of risk. Ab Small Cap is currently generating about 0.06 per unit of risk. If you would invest 1,764 in Applied Finance Explorer on August 31, 2024 and sell it today you would earn a total of 664.00 from holding Applied Finance Explorer or generate 37.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
Applied Finance Explorer vs. Ab Small Cap
Performance |
| Timeline |
| Applied Finance Explorer |
| Ab Small Cap |
Applied Finance and Ab Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Finance and Ab Small
The main advantage of trading using opposite Applied Finance and Ab Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Finance position performs unexpectedly, Ab Small 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 Ab Small will offset losses from the drop in Ab Small's long position.| Applied Finance vs. Vanguard Small Cap Value | Applied Finance vs. Vanguard Small Cap Value | Applied Finance vs. Us Targeted Value | Applied Finance vs. Undiscovered Managers Behavioral |
| Ab Small vs. Vanguard Small Cap Value | Ab Small vs. Vanguard Small Cap Value | Ab Small vs. Us Targeted Value | Ab Small vs. Undiscovered Managers Behavioral |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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