Correlation Between AB Ultra and AB Disruptors

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

By analyzing existing cross correlation between AB Ultra Short and AB Disruptors ETF, you can compare the effects of market volatilities on AB Ultra and AB Disruptors 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 Ultra with a short position of AB Disruptors. Check out your portfolio center. Please also check ongoing floating volatility patterns of AB Ultra and AB Disruptors.

Diversification Opportunities for AB Ultra and AB Disruptors

0.77

Correlation Coefficient

AB Ultra  AB Disruptors

Poor diversification

The 3 months correlation between YEAR and FWD is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding AB Ultra Short and AB Disruptors ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Disruptors ETF and AB Ultra 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 Ultra Short are associated (or correlated) with AB Disruptors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Disruptors ETF has no effect on the direction of AB Ultra i.e., AB Ultra and AB Disruptors go up and down completely randomly.

Pair Corralation between AB Ultra and AB Disruptors

Given the investment horizon of 90 days AB Ultra is expected to generate 28.79 times less return on investment than AB Disruptors. But when comparing it to its historical volatility, AB Ultra Short is 13.3 times less risky than AB Disruptors. It trades about 0.08 of its potential returns per unit of risk. AB Disruptors ETF is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  7,372  in AB Disruptors ETF on September 4, 2024 and sell it today you would earn a total of  1,010  from holding AB Disruptors ETF or generate 13.7% return on investment over 90 days.

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

AB Ultra Short  vs.  AB Disruptors ETF

AB Ultra Short

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AB Ultra Short are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, AB Ultra is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

AB Disruptors ETF

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AB Disruptors ETF are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, AB Disruptors exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AB Ultra and AB Disruptors

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

The idea behind AB Ultra Short and AB Disruptors ETF 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.