Correlation Between Alliancebernstein and American Fds

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

By analyzing existing cross correlation between Alliancebernstein Global High and American Fds Smallcap, you can compare the effects of market volatilities on Alliancebernstein and American Fds 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 Alliancebernstein with a short position of American Fds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliancebernstein and American Fds.

Diversification Opportunities for Alliancebernstein and American Fds

0.25

Correlation Coefficient

Alliancebernstein  American Fds

Modest diversification

The 3 months correlation between Alliancebernstein and American is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Alliancebernstein Global High and American Fds Smallcap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Fds Smallcap and Alliancebernstein 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 Alliancebernstein Global High are associated (or correlated) with American Fds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Fds Smallcap has no effect on the direction of Alliancebernstein i.e., Alliancebernstein and American Fds go up and down completely randomly.

Pair Corralation between Alliancebernstein and American Fds

Considering the 90-day investment horizon Alliancebernstein Global High is expected to under-perform the American Fds. But the fund apears to be less risky and, when comparing its historical volatility, Alliancebernstein Global High is 1.88 times less risky than American Fds. The fund trades about 0.0 of its potential returns per unit of risk. The American Fds Smallcap is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  5,474  in American Fds Smallcap on September 4, 2024 and sell it today you would earn a total of  324.00  from holding American Fds Smallcap or generate 5.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Alliancebernstein Global High  vs.  American Fds Smallcap

Alliancebernstein

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alliancebernstein Global High has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable basic indicators, Alliancebernstein is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

American Fds Smallcap

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Fds Smallcap are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, American Fds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alliancebernstein and American Fds

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

The idea behind Alliancebernstein Global High and American Fds Smallcap 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.