Correlation Between Small Cap and Ab Discovery
Can any of the company-specific risk be diversified away by investing in both Small Cap and Ab Discovery 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 Small Cap and Ab Discovery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Core and Ab Discovery Value, you can compare the effects of market volatilities on Small Cap and Ab Discovery 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 Small Cap with a short position of Ab Discovery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Ab Discovery.
Diversification Opportunities for Small Cap and Ab Discovery
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Small and ABYSX is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Core and Ab Discovery Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Discovery Value and Small Cap 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 Small Cap Core are associated (or correlated) with Ab Discovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Discovery Value has no effect on the direction of Small Cap i.e., Small Cap and Ab Discovery go up and down completely randomly.
Pair Corralation between Small Cap and Ab Discovery
Assuming the 90 days horizon Small Cap is expected to generate 1.48 times less return on investment than Ab Discovery. In addition to that, Small Cap is 1.28 times more volatile than Ab Discovery Value. It trades about 0.12 of its total potential returns per unit of risk. Ab Discovery Value is currently generating about 0.23 per unit of volatility. If you would invest 2,435 in Ab Discovery Value on August 24, 2024 and sell it today you would earn a total of 171.00 from holding Ab Discovery Value or generate 7.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Core vs. Ab Discovery Value
Performance |
| Timeline |
| Small Cap Core |
| Ab Discovery Value |
Small Cap and Ab Discovery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Ab Discovery
The main advantage of trading using opposite Small Cap and Ab Discovery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Ab Discovery 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 Discovery will offset losses from the drop in Ab Discovery's long position.| Small Cap vs. Ab Government Exchange | Small Cap vs. Us Government Securities | Small Cap vs. John Hancock Government | Small Cap vs. Virtus Seix Government |
| Ab Discovery vs. Ab Discovery Growth | Ab Discovery vs. Ab International Value | Ab Discovery vs. Small Cap Core | Ab Discovery vs. Ab International Growth |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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