Correlation Between Ab Small and American Funds
Can any of the company-specific risk be diversified away by investing in both Ab Small and American Funds 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 Small and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ab Small Cap and American Funds 2030, you can compare the effects of market volatilities on Ab Small and American Funds 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 Small with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Small and American Funds.
Diversification Opportunities for Ab Small and American Funds
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between QUAIX and American is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Ab Small Cap and American Funds 2030 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2030 and Ab Small 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 Small Cap are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds 2030 has no effect on the direction of Ab Small i.e., Ab Small and American Funds go up and down completely randomly.
Pair Corralation between Ab Small and American Funds
Assuming the 90 days horizon Ab Small Cap is expected to generate 3.99 times more return on investment than American Funds. However, Ab Small is 3.99 times more volatile than American Funds 2030. It trades about 0.28 of its potential returns per unit of risk. American Funds 2030 is currently generating about 0.29 per unit of risk. If you would invest 7,238 in Ab Small Cap on September 2, 2024 and sell it today you would earn a total of 672.00 from holding Ab Small Cap or generate 9.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ab Small Cap vs. American Funds 2030
Performance |
| Timeline |
| Ab Small Cap |
| American Funds 2030 |
Ab Small and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ab Small and American Funds
The main advantage of trading using opposite Ab Small and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Small position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Ab Small vs. Dreyfus Institutional Reserves | Ab Small vs. Ashmore Emerging Markets | Ab Small vs. Meeder Funds | Ab Small vs. Jpmorgan Trust I |
| American Funds vs. Franklin High Yield | American Funds vs. Bbh Intermediate Municipal | American Funds vs. Federated Ohio Municipal | American Funds vs. Alliancebernstein National Municipal |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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