Correlation Between Us Government and Ab Global

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

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

Diversification Opportunities for Us Government and Ab Global

0.84

Correlation Coefficient

Us Government  Ab Global

Very poor diversification

The 3 months correlation between RGVCX and AEEIX is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Securities and Ab Global Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Global Real and Us Government 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 Us Government Securities are associated (or correlated) with Ab Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Global Real has no effect on the direction of Us Government i.e., Us Government and Ab Global go up and down completely randomly.

Pair Corralation between Us Government and Ab Global

Assuming the 90 days horizon Us Government is expected to generate 6.98 times less return on investment than Ab Global. But when comparing it to its historical volatility, Us Government Securities is 2.26 times less risky than Ab Global. It trades about 0.01 of its potential returns per unit of risk. Ab Global Real is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,311  in Ab Global Real on September 4, 2024 and sell it today you would earn a total of  221.00  from holding Ab Global Real or generate 16.86% return on investment over 90 days.

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

Us Government Securities  vs.  Ab Global Real

Us Government Securities

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ab Global Real

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Us Government and Ab Global

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

The idea behind Us Government Securities and Ab Global Real 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.