Correlation Between Ab Pennsylvania and Ab Minnesota
Can any of the company-specific risk be diversified away by investing in both Ab Pennsylvania and Ab Minnesota 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 Pennsylvania and Ab Minnesota into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ab Pennsylvania Portfolio and Ab Minnesota Portfolio, you can compare the effects of market volatilities on Ab Pennsylvania and Ab Minnesota 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 Pennsylvania with a short position of Ab Minnesota. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Pennsylvania and Ab Minnesota.
Diversification Opportunities for Ab Pennsylvania and Ab Minnesota
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between APAAX and AMNAX is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Ab Pennsylvania Portfolio and Ab Minnesota Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Minnesota Portfolio and Ab Pennsylvania 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 Pennsylvania Portfolio are associated (or correlated) with Ab Minnesota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Minnesota Portfolio has no effect on the direction of Ab Pennsylvania i.e., Ab Pennsylvania and Ab Minnesota go up and down completely randomly.
Pair Corralation between Ab Pennsylvania and Ab Minnesota
Assuming the 90 days horizon Ab Pennsylvania is expected to generate 126.45 times less return on investment than Ab Minnesota. But when comparing it to its historical volatility, Ab Pennsylvania Portfolio is 211.05 times less risky than Ab Minnesota. It trades about 0.07 of its potential returns per unit of risk. Ab Minnesota Portfolio is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 909.00 in Ab Minnesota Portfolio on August 28, 2024 and sell it today you would earn a total of 52.00 from holding Ab Minnesota Portfolio or generate 5.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.79% |
| Values | Daily Returns |
Ab Pennsylvania Portfolio vs. Ab Minnesota Portfolio
Performance |
| Timeline |
| Ab Pennsylvania Portfolio |
| Ab Minnesota Portfolio |
Ab Pennsylvania and Ab Minnesota Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ab Pennsylvania and Ab Minnesota
The main advantage of trading using opposite Ab Pennsylvania and Ab Minnesota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Pennsylvania position performs unexpectedly, Ab Minnesota 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 Minnesota will offset losses from the drop in Ab Minnesota's long position.| Ab Pennsylvania vs. Ab Global E | Ab Pennsylvania vs. Ab Global E | Ab Pennsylvania vs. Ab Global E | Ab Pennsylvania vs. Ab Minnesota Portfolio |
| Ab Minnesota vs. Ab Global E | Ab Minnesota vs. Ab Global E | Ab Minnesota vs. Ab Global E | Ab Minnesota vs. Ab Minnesota Portfolio |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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