Correlation Between Ab Small and Ultrashort Emerging

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

By analyzing existing cross correlation between Ab Small Cap and Ultrashort Emerging Markets, you can compare the effects of market volatilities on Ab Small and Ultrashort Emerging 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 Small with a short position of Ultrashort Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Small and Ultrashort Emerging.

Diversification Opportunities for Ab Small and Ultrashort Emerging

0.55

Correlation Coefficient

Ab Small  Ultrashort Emerging

Very weak diversification

The 3 months correlation between QUAIX and Ultrashort is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Ab Small Cap and Ultrashort Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrashort Emerging and Ab Small 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 Small Cap are associated (or correlated) with Ultrashort Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultrashort Emerging has no effect on the direction of Ab Small i.e., Ab Small and Ultrashort Emerging go up and down completely randomly.

Pair Corralation between Ab Small and Ultrashort Emerging

Assuming the 90 days horizon Ab Small Cap is expected to under-perform the Ultrashort Emerging. But the mutual fund apears to be less risky and, when comparing its historical volatility, Ab Small Cap is 1.7 times less risky than Ultrashort Emerging. The mutual fund trades about -0.19 of its potential returns per unit of risk. The Ultrashort Emerging Markets is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,364  in Ultrashort Emerging Markets on September 27, 2024 and sell it today you would lose (26.00) from holding Ultrashort Emerging Markets or give up 1.91% of portfolio value over 90 days.

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

Ab Small Cap  vs.  Ultrashort Emerging Markets

Ab Small Cap

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Small Cap are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Ab Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ultrashort Emerging

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ultrashort Emerging Markets are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ultrashort Emerging showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ab Small and Ultrashort Emerging

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

The idea behind Ab Small Cap and Ultrashort Emerging Markets 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.