Correlation Between Investment Grade and Ab Large

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

Diversification Opportunities for Investment Grade and Ab Large

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between Investment and ALCKX is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Investment Grade Porate and Ab Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Large Cap and Investment Grade 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 Investment Grade Porate are associated (or correlated) with Ab Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Large Cap has no effect on the direction of Investment Grade i.e., Investment Grade and Ab Large go up and down completely randomly.

Pair Corralation between Investment Grade and Ab Large

Assuming the 90 days horizon Investment Grade is expected to generate 4.48 times less return on investment than Ab Large. But when comparing it to its historical volatility, Investment Grade Porate is 2.53 times less risky than Ab Large. It trades about 0.04 of its potential returns per unit of risk. Ab Large Cap is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  6,890  in Ab Large Cap on November 2, 2024 and sell it today you would earn a total of  3,178  from holding Ab Large Cap or generate 46.12% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.8%
ValuesDaily Returns

Investment Grade Porate  vs.  Ab Large Cap

 Performance 
       Timeline  
Investment Grade Porate 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

0 of 100

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

Investment Grade and Ab Large Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Investment Grade and Ab Large

The main advantage of trading using opposite Investment Grade and Ab Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investment Grade position performs unexpectedly, Ab Large 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 Large will offset losses from the drop in Ab Large's long position.
The idea behind Investment Grade Porate and Ab Large Cap 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.
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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