Correlation Between Ab Value and Steward Equity

Can any of the company-specific risk be diversified away by investing in both Ab Value and Steward Equity 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 Value and Steward Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ab Value Fund and Steward Equity Market, you can compare the effects of market volatilities on Ab Value and Steward Equity 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 Value with a short position of Steward Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Value and Steward Equity.

Diversification Opportunities for Ab Value and Steward Equity

-0.81

Correlation Coefficient

Ab Value  Steward Equity

Pay attention - limited upside

The 3 months correlation between ABVCX and Steward is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Ab Value Fund and Steward Equity Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steward Equity Market and Ab Value 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 Value Fund are associated (or correlated) with Steward Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steward Equity Market has no effect on the direction of Ab Value i.e., Ab Value and Steward Equity go up and down completely randomly.

Pair Corralation between Ab Value and Steward Equity

Assuming the 90 days horizon Ab Value Fund is expected to generate 1.48 times more return on investment than Steward Equity. However, Ab Value is 1.48 times more volatile than Steward Equity Market. It trades about 0.16 of its potential returns per unit of risk. Steward Equity Market is currently generating about -0.12 per unit of risk. If you would invest  1,872  in Ab Value Fund on September 13, 2024 and sell it today you would earn a total of  131.00  from holding Ab Value Fund or generate 7.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Ab Value Fund  vs.  Steward Equity Market

Ab Value Fund

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Value Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Ab Value may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Steward Equity Market

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steward Equity Market has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Steward Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ab Value and Steward Equity

The main advantage of trading using opposite Ab Value and Steward Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Value position performs unexpectedly, Steward Equity 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 Steward Equity will offset losses from the drop in Steward Equity's long position.

The idea behind Ab Value Fund and Steward Equity Market 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.