Can any of the company-specific risk be diversified away by investing in both Ab All 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 All 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 All Market and American Funds Global, you can compare the effects of market volatilities on Ab All 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 All with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab All and American Funds.
Diversification Opportunities for Ab All and American Funds
The 3 months correlation between AMTOX and American is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Ab All Market 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 All 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 All Market 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 All i.e., Ab All and American Funds go up and down completely randomly.
Pair Corralation between Ab All and American Funds
Assuming the 90 days horizon Ab All Market is expected to generate 0.81 times more return on investment than American Funds. However, Ab All Market is 1.24 times less risky than American Funds. It trades about 0.1 of its potential returns per unit of risk. American Funds Global is currently generating about 0.05 per unit of risk. If you would invest 855.00 in Ab All Market on March 6, 2024 and sell it today you would earn a total of 32.00 from holding Ab All Market or generate 3.74% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Ab All Market are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ab All is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
Compared to the overall equity markets, risk-adjusted returns on investments in American Funds Global are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, American Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.