Correlation Between Ab Discovery and Mid Cap

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Can any of the company-specific risk be diversified away by investing in both Ab Discovery and Mid Cap 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 Discovery and Mid Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ab Discovery Value and Mid Cap Value, you can compare the effects of market volatilities on Ab Discovery and Mid Cap 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 Discovery with a short position of Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Discovery and Mid Cap.

Diversification Opportunities for Ab Discovery and Mid Cap

0.94
  Correlation Coefficient

Almost no diversification

The 3 months correlation between ABSRX and Mid is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Ab Discovery Value and Mid Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Value and Ab Discovery 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 Discovery Value are associated (or correlated) with Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap Value has no effect on the direction of Ab Discovery i.e., Ab Discovery and Mid Cap go up and down completely randomly.

Pair Corralation between Ab Discovery and Mid Cap

Assuming the 90 days horizon Ab Discovery Value is expected to under-perform the Mid Cap. In addition to that, Ab Discovery is 1.32 times more volatile than Mid Cap Value. It trades about -0.14 of its total potential returns per unit of risk. Mid Cap Value is currently generating about 0.01 per unit of volatility. If you would invest  1,574  in Mid Cap Value on January 26, 2024 and sell it today you would earn a total of  1.00  from holding Mid Cap Value or generate 0.06% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Ab Discovery Value  vs.  Mid Cap Value

 Performance 
       Timeline  
Ab Discovery Value 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Ab Discovery Value are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ab Discovery is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Mid Cap Value 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Value are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Mid Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ab Discovery and Mid Cap Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ab Discovery and Mid Cap

The main advantage of trading using opposite Ab Discovery and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Discovery position performs unexpectedly, Mid Cap 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 Mid Cap will offset losses from the drop in Mid Cap's long position.
The idea behind Ab Discovery Value and Mid Cap Value 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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