Correlation Between American Funds and Ab Small
Can any of the company-specific risk be diversified away by investing in both American Funds and Ab Small 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 American Funds and Ab Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Retirement and Ab Small Cap, you can compare the effects of market volatilities on American Funds and Ab Small 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 American Funds with a short position of Ab Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Ab Small.
Diversification Opportunities for American Funds and Ab Small
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and QUAKX is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Retirement and Ab Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Small Cap and American Funds 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 American Funds Retirement are associated (or correlated) with Ab Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Small Cap has no effect on the direction of American Funds i.e., American Funds and Ab Small go up and down completely randomly.
Pair Corralation between American Funds and Ab Small
Assuming the 90 days horizon American Funds is expected to generate 2.37 times less return on investment than Ab Small. But when comparing it to its historical volatility, American Funds Retirement is 3.43 times less risky than Ab Small. It trades about 0.15 of its potential returns per unit of risk. Ab Small Cap is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 5,155 in Ab Small Cap on September 3, 2024 and sell it today you would earn a total of 1,969 from holding Ab Small Cap or generate 38.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Retirement vs. Ab Small Cap
Performance |
| Timeline |
| American Funds Retirement |
| Ab Small Cap |
American Funds and Ab Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Ab Small
The main advantage of trading using opposite American Funds and Ab Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Ab Small 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 Small will offset losses from the drop in Ab Small's long position.| American Funds vs. Alphacentric Lifesci Healthcare | American Funds vs. Blackrock Health Sciences | American Funds vs. Eventide Healthcare Life | American Funds vs. Deutsche Health And |
| Ab Small vs. Ab Large Cap | Ab Small vs. Ab Small Cap | Ab Small vs. Ab Small Cap | Ab Small vs. Ab Small Cap |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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