Correlation Between Ab New and Ab Discovery
Can any of the company-specific risk be diversified away by investing in both Ab New and Ab Discovery 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 New and Ab Discovery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ab New Jersey and Ab Discovery Value, you can compare the effects of market volatilities on Ab New and Ab Discovery 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 New with a short position of Ab Discovery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab New and Ab Discovery.
Diversification Opportunities for Ab New and Ab Discovery
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ANJAX and ABYSX is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Ab New Jersey and Ab Discovery Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Discovery Value and Ab New 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 New Jersey are associated (or correlated) with Ab Discovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Discovery Value has no effect on the direction of Ab New i.e., Ab New and Ab Discovery go up and down completely randomly.
Pair Corralation between Ab New and Ab Discovery
Assuming the 90 days horizon Ab New is expected to generate 3.58 times less return on investment than Ab Discovery. But when comparing it to its historical volatility, Ab New Jersey is 4.61 times less risky than Ab Discovery. It trades about 0.08 of its potential returns per unit of risk. Ab Discovery Value is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,104 in Ab Discovery Value on August 31, 2024 and sell it today you would earn a total of 532.00 from holding Ab Discovery Value or generate 25.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.73% |
| Values | Daily Returns |
Ab New Jersey vs. Ab Discovery Value
Performance |
| Timeline |
| Ab New Jersey |
| Ab Discovery Value |
Ab New and Ab Discovery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ab New and Ab Discovery
The main advantage of trading using opposite Ab New and Ab Discovery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab New position performs unexpectedly, Ab Discovery 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 Discovery will offset losses from the drop in Ab Discovery's long position.| Ab New vs. Western Asset Diversified | Ab New vs. Transamerica Emerging Markets | Ab New vs. Siit Emerging Markets | Ab New vs. Vanguard Developed Markets |
| Ab Discovery vs. Ab Discovery Growth | Ab Discovery vs. Ab International Value | Ab Discovery vs. Small Cap Core | Ab Discovery vs. Ab International Growth |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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