Correlation Between Ab Municipal and First Investors
Can any of the company-specific risk be diversified away by investing in both Ab Municipal and First Investors 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 Municipal and First Investors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ab Municipal Bond and First Investors Tax, you can compare the effects of market volatilities on Ab Municipal and First Investors 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 Municipal with a short position of First Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Municipal and First Investors.
Diversification Opportunities for Ab Municipal and First Investors
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between AUNCX and First is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ab Municipal Bond and First Investors Tax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Investors Tax and Ab Municipal 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 Municipal Bond are associated (or correlated) with First Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Investors Tax has no effect on the direction of Ab Municipal i.e., Ab Municipal and First Investors go up and down completely randomly.
Pair Corralation between Ab Municipal and First Investors
Assuming the 90 days horizon Ab Municipal is expected to generate 2.37 times less return on investment than First Investors. But when comparing it to its historical volatility, Ab Municipal Bond is 2.77 times less risky than First Investors. It trades about 0.2 of its potential returns per unit of risk. First Investors Tax is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,234 in First Investors Tax on September 1, 2024 and sell it today you would earn a total of 19.00 from holding First Investors Tax or generate 1.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ab Municipal Bond vs. First Investors Tax
Performance |
| Timeline |
| Ab Municipal Bond |
| First Investors Tax |
Ab Municipal and First Investors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ab Municipal and First Investors
The main advantage of trading using opposite Ab Municipal and First Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Municipal position performs unexpectedly, First Investors 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 First Investors will offset losses from the drop in First Investors' long position.| Ab Municipal vs. Ab Global E | Ab Municipal vs. Ab Global E | Ab Municipal vs. Ab Global E | Ab Municipal vs. Ab Minnesota Portfolio |
| First Investors vs. Optimum Small Mid Cap | First Investors vs. Optimum Small Mid Cap | First Investors vs. Ivy Apollo Multi Asset | First Investors vs. Optimum Fixed Income |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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