Correlation Between Ab Municipal and Capital World
Can any of the company-specific risk be diversified away by investing in both Ab Municipal and Capital World 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 Capital World 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 Capital World Growth, you can compare the effects of market volatilities on Ab Municipal and Capital World 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 Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Municipal and Capital World.
Diversification Opportunities for Ab Municipal and Capital World
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AUNYX and Capital is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Ab Municipal Bond and Capital World Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Growth 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 Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Growth has no effect on the direction of Ab Municipal i.e., Ab Municipal and Capital World go up and down completely randomly.
Pair Corralation between Ab Municipal and Capital World
Assuming the 90 days horizon Ab Municipal Bond is expected to generate 0.22 times more return on investment than Capital World. However, Ab Municipal Bond is 4.61 times less risky than Capital World. It trades about 0.18 of its potential returns per unit of risk. Capital World Growth is currently generating about 0.01 per unit of risk. If you would invest 1,075 in Ab Municipal Bond on August 31, 2024 and sell it today you would earn a total of 6.00 from holding Ab Municipal Bond or generate 0.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ab Municipal Bond vs. Capital World Growth
Performance |
| Timeline |
| Ab Municipal Bond |
| Capital World Growth |
Ab Municipal and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ab Municipal and Capital World
The main advantage of trading using opposite Ab Municipal and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Municipal position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World's long position.| Ab Municipal vs. Nationwide Inflation Protected Securities | Ab Municipal vs. Lord Abbett Inflation | Ab Municipal vs. The Hartford Inflation | Ab Municipal vs. Ab Bond Inflation |
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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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