Correlation Between Ab Small and Stone Ridge
Can any of the company-specific risk be diversified away by investing in both Ab Small and Stone Ridge 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 Stone Ridge 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 Stone Ridge Diversified, you can compare the effects of market volatilities on Ab Small and Stone Ridge 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 Stone Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Small and Stone Ridge.
Diversification Opportunities for Ab Small and Stone Ridge
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between QUAIX and Stone is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Ab Small Cap and Stone Ridge Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Ridge Diversified 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 Stone Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Ridge Diversified has no effect on the direction of Ab Small i.e., Ab Small and Stone Ridge go up and down completely randomly.
Pair Corralation between Ab Small and Stone Ridge
Assuming the 90 days horizon Ab Small Cap is expected to generate 6.38 times more return on investment than Stone Ridge. However, Ab Small is 6.38 times more volatile than Stone Ridge Diversified. It trades about 0.07 of its potential returns per unit of risk. Stone Ridge Diversified is currently generating about 0.25 per unit of risk. If you would invest 5,450 in Ab Small Cap on September 3, 2024 and sell it today you would earn a total of 2,460 from holding Ab Small Cap or generate 45.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ab Small Cap vs. Stone Ridge Diversified
Performance |
| Timeline |
| Ab Small Cap |
| Stone Ridge Diversified |
Ab Small and Stone Ridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ab Small and Stone Ridge
The main advantage of trading using opposite Ab Small and Stone Ridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Small position performs unexpectedly, Stone Ridge 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 Stone Ridge will offset losses from the drop in Stone Ridge's long position.| Ab Small vs. Principal Lifetime Hybrid | Ab Small vs. Semiconductor Ultrasector Profund | Ab Small vs. Issachar Fund Class | Ab Small vs. Federated Mdt Large |
| Stone Ridge vs. Ab Global Bond | Stone Ridge vs. Qs Global Equity | Stone Ridge vs. Ab Global Real | Stone Ridge vs. Ab Global Risk |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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