Correlation Between Ab Global and American Funds

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

Diversification Opportunities for Ab Global and American Funds

0.97
  Correlation Coefficient

Almost no diversification

The 3 months correlation between GCEAX and American is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding AB GLOBAL E and AMERICAN FUNDS GLOBAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Global and Ab Global 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 Global E are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Global has no effect on the direction of Ab Global i.e., Ab Global and American Funds go up and down completely randomly.

Pair Corralation between Ab Global and American Funds

Assuming the 90 days horizon Ab Global E is expected to generate 0.81 times more return on investment than American Funds. However, Ab Global E is 1.24 times less risky than American Funds. It trades about 0.29 of its potential returns per unit of risk. American Funds Global is currently generating about 0.22 per unit of risk. If you would invest  1,600  in Ab Global E on December 30, 2023 and sell it today you would earn a total of  56.00  from holding Ab Global E or generate 3.5% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

AB GLOBAL E  vs.  AMERICAN FUNDS GLOBAL

 Performance 
       Timeline  
Ab Global E 

Risk-Adjusted Performance

13 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Ab Global E are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ab Global may actually be approaching a critical reversion point that can send shares even higher in April 2024.
American Funds Global 

Risk-Adjusted Performance

17 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in American Funds Global are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, American Funds may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Ab Global and American Funds Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ab Global and American Funds

The main advantage of trading using opposite Ab Global and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Global position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.
The idea behind Ab Global E and American Funds Global 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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