Correlation Between Fabxx and Ab New

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Can any of the company-specific risk be diversified away by investing in both Fabxx and Ab New 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 Fabxx and Ab New into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fabxx and Ab New York, you can compare the effects of market volatilities on Fabxx and Ab New 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 Fabxx with a short position of Ab New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fabxx and Ab New.

Diversification Opportunities for Fabxx and Ab New

-0.03
  Correlation Coefficient

Good diversification

The 3 months correlation between Fabxx and ALNVX is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Fabxx and Ab New York in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab New York and Fabxx 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 Fabxx are associated (or correlated) with Ab New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab New York has no effect on the direction of Fabxx i.e., Fabxx and Ab New go up and down completely randomly.

Pair Corralation between Fabxx and Ab New

Assuming the 90 days horizon Fabxx is expected to under-perform the Ab New. In addition to that, Fabxx is 32.59 times more volatile than Ab New York. It trades about -0.06 of its total potential returns per unit of risk. Ab New York is currently generating about 0.0 per unit of volatility. If you would invest  919.00  in Ab New York on October 17, 2024 and sell it today you would lose (1.00) from holding Ab New York or give up 0.11% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.31%
ValuesDaily Returns

Fabxx  vs.  Ab New York

 Performance 
       Timeline  
Fabxx 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Fabxx has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.
Ab New York 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Ab New York has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Ab New is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fabxx and Ab New Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Fabxx and Ab New

The main advantage of trading using opposite Fabxx and Ab New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fabxx position performs unexpectedly, Ab New 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 New will offset losses from the drop in Ab New's long position.
The idea behind Fabxx and Ab New York pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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