Correlation Between AB Ultra and Ab Tax

Can any of the company-specific risk be diversified away by investing in both AB Ultra and Ab Tax 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 Tax 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 Tax Aware Short, you can compare the effects of market volatilities on AB Ultra and Ab Tax 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 Tax. Check out your portfolio center. Please also check ongoing floating volatility patterns of AB Ultra and Ab Tax.

Diversification Opportunities for AB Ultra and Ab Tax

0.41

Correlation Coefficient

AB Ultra  Ab Tax

Very weak diversification

The 3 months correlation between YEAR and TAFI is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding AB Ultra Short and Ab Tax Aware Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Tax Aware 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 Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Tax Aware has no effect on the direction of AB Ultra i.e., AB Ultra and Ab Tax go up and down completely randomly.

Pair Corralation between AB Ultra and Ab Tax

Given the investment horizon of 90 days AB Ultra Short is expected to generate 0.69 times more return on investment than Ab Tax. However, AB Ultra Short is 1.45 times less risky than Ab Tax. It trades about 0.26 of its potential returns per unit of risk. Ab Tax Aware Short is currently generating about 0.11 per unit of risk. If you would invest  4,541  in AB Ultra Short on August 30, 2024 and sell it today you would earn a total of  523.00  from holding AB Ultra Short or generate 11.52% return on investment over 90 days.

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

AB Ultra Short  vs.  Ab Tax Aware Short

AB Ultra Short

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AB Ultra Short are ranked lower than 17 (%) 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 Tax Aware

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Tax Aware Short are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Ab Tax is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with AB Ultra and Ab Tax

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

The idea behind AB Ultra Short and Ab Tax Aware Short 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.