Correlation Between Ab Small and Power Momentum
Can any of the company-specific risk be diversified away by investing in both Ab Small and Power Momentum 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 Power Momentum 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 Power Momentum Index, you can compare the effects of market volatilities on Ab Small and Power Momentum 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 Power Momentum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Small and Power Momentum.
Diversification Opportunities for Ab Small and Power Momentum
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between QUAIX and Power is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Ab Small Cap and Power Momentum Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Momentum Index 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 Power Momentum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Momentum Index has no effect on the direction of Ab Small i.e., Ab Small and Power Momentum go up and down completely randomly.
Pair Corralation between Ab Small and Power Momentum
Assuming the 90 days horizon Ab Small Cap is expected to generate 1.3 times more return on investment than Power Momentum. However, Ab Small is 1.3 times more volatile than Power Momentum Index. It trades about 0.11 of its potential returns per unit of risk. Power Momentum Index is currently generating about 0.12 per unit of risk. If you would invest 5,674 in Ab Small Cap on September 2, 2024 and sell it today you would earn a total of 2,236 from holding Ab Small Cap or generate 39.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ab Small Cap vs. Power Momentum Index
Performance |
| Timeline |
| Ab Small Cap |
| Power Momentum Index |
Ab Small and Power Momentum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ab Small and Power Momentum
The main advantage of trading using opposite Ab Small and Power Momentum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Small position performs unexpectedly, Power Momentum 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 Power Momentum will offset losses from the drop in Power Momentum's 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 |
| Power Momentum vs. Omni Small Cap Value | Power Momentum vs. Bbh Partner Fund | Power Momentum vs. Eic Value Fund | Power Momentum vs. Commonwealth Global Fund |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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