Correlation Between The National and Ab Impact
Can any of the company-specific risk be diversified away by investing in both The National and Ab Impact 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 The National and Ab Impact into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The National Tax Free and Ab Impact Municipal, you can compare the effects of market volatilities on The National and Ab Impact 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 The National with a short position of Ab Impact. Check out your portfolio center. Please also check ongoing floating volatility patterns of The National and Ab Impact.
Diversification Opportunities for The National and Ab Impact
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between THE and ABIMX is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding The National Tax Free and Ab Impact Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Impact Municipal and The National 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 The National Tax Free are associated (or correlated) with Ab Impact. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Impact Municipal has no effect on the direction of The National i.e., The National and Ab Impact go up and down completely randomly.
Pair Corralation between The National and Ab Impact
Assuming the 90 days horizon The National is expected to generate 2.26 times less return on investment than Ab Impact. But when comparing it to its historical volatility, The National Tax Free is 1.56 times less risky than Ab Impact. It trades about 0.05 of its potential returns per unit of risk. Ab Impact Municipal is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 888.00 in Ab Impact Municipal on August 28, 2024 and sell it today you would earn a total of 105.00 from holding Ab Impact Municipal or generate 11.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The National Tax Free vs. Ab Impact Municipal
Performance |
| Timeline |
| National Tax |
| Ab Impact Municipal |
The National and Ab Impact Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with The National and Ab Impact
The main advantage of trading using opposite The National and Ab Impact positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The National position performs unexpectedly, Ab Impact 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 Impact will offset losses from the drop in Ab Impact's long position.| The National vs. The Missouri Tax Free | The National vs. The Bond Fund | The National vs. High Yield Municipal Fund | The National vs. Fidelity Intermediate Municipal |
| Ab Impact vs. Dreyfusstandish Global Fixed | Ab Impact vs. Ultra Short Term Fixed | Ab Impact vs. Vanguard Telecommunication Services | Ab Impact vs. Gmo Equity Allocation |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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