Correlation Between Ab Global and Near Term

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

By analyzing existing cross correlation between Ab Global Bond and Near Term Tax Free, you can compare the effects of market volatilities on Ab Global and Near Term 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 Global with a short position of Near Term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Global and Near Term.

Diversification Opportunities for Ab Global and Near Term

0.26

Correlation Coefficient

Ab Global  Near Term

Modest diversification

The 3 months correlation between ANAGX and Near is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ab Global Bond and Near Term Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Near Term Tax and Ab Global 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 Global Bond are associated (or correlated) with Near Term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Near Term Tax has no effect on the direction of Ab Global i.e., Ab Global and Near Term go up and down completely randomly.

Pair Corralation between Ab Global and Near Term

Assuming the 90 days horizon Ab Global Bond is expected to under-perform the Near Term. In addition to that, Ab Global is 1.66 times more volatile than Near Term Tax Free. It trades about -0.13 of its total potential returns per unit of risk. Near Term Tax Free is currently generating about -0.06 per unit of volatility. If you would invest  210.00  in Near Term Tax Free on September 22, 2024 and sell it today you would lose (1.00) from holding Near Term Tax Free or give up 0.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ab Global Bond  vs.  Near Term Tax Free

Ab Global Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Near Term Tax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Near Term Tax Free has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Near Term 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 Global and Near Term

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

The idea behind Ab Global Bond and Near Term Tax Free 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.

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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.