Correlation Between American Fds and Alliancebernstein

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

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

Diversification Opportunities for American Fds and Alliancebernstein

0.25

Correlation Coefficient

American Fds  Alliancebernstein

Modest diversification

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

Pair Corralation between American Fds and Alliancebernstein

Assuming the 90 days horizon American Fds is expected to generate 1.24 times less return on investment than Alliancebernstein. In addition to that, American Fds is 1.74 times more volatile than Alliancebernstein Global High. It trades about 0.07 of its total potential returns per unit of risk. Alliancebernstein Global High is currently generating about 0.14 per unit of volatility. If you would invest  918.00  in Alliancebernstein Global High on September 4, 2024 and sell it today you would earn a total of  183.00  from holding Alliancebernstein Global High or generate 19.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

American Fds Smallcap  vs.  Alliancebernstein Global High

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.

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.

Pair Trading with American Fds and Alliancebernstein

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

The idea behind American Fds Smallcap and Alliancebernstein Global High 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.