Correlation Between Ultra-short Fixed and Ab Select

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Can any of the company-specific risk be diversified away by investing in both Ultra-short Fixed and Ab Select 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 Ultra-short Fixed and Ab Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ultra Short Fixed Income and Ab Select Longshort, you can compare the effects of market volatilities on Ultra-short Fixed and Ab Select 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 Ultra-short Fixed with a short position of Ab Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra-short Fixed and Ab Select.

Diversification Opportunities for Ultra-short Fixed and Ab Select

0.6
  Correlation Coefficient

Poor diversification

The 3 months correlation between Ultra-Short and ASCLX is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Short Fixed Income and Ab Select Longshort in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Select Longshort and Ultra-short Fixed 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 Ultra Short Fixed Income are associated (or correlated) with Ab Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Select Longshort has no effect on the direction of Ultra-short Fixed i.e., Ultra-short Fixed and Ab Select go up and down completely randomly.

Pair Corralation between Ultra-short Fixed and Ab Select

Assuming the 90 days horizon Ultra Short Fixed Income is expected to under-perform the Ab Select. But the mutual fund apears to be less risky and, when comparing its historical volatility, Ultra Short Fixed Income is 16.48 times less risky than Ab Select. The mutual fund trades about -0.12 of its potential returns per unit of risk. The Ab Select Longshort is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,368  in Ab Select Longshort on August 25, 2024 and sell it today you would earn a total of  28.00  from holding Ab Select Longshort or generate 2.05% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Ultra Short Fixed Income  vs.  Ab Select Longshort

 Performance 
       Timeline  
Ultra Short Fixed 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Short Fixed Income are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Ultra-short Fixed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Ab Select Longshort 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Ab Select Longshort are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Ab Select is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ultra-short Fixed and Ab Select Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ultra-short Fixed and Ab Select

The main advantage of trading using opposite Ultra-short Fixed and Ab Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultra-short Fixed position performs unexpectedly, Ab Select 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 Select will offset losses from the drop in Ab Select's long position.
The idea behind Ultra Short Fixed Income and Ab Select Longshort pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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