Can any of the company-specific risk be diversified away by investing in both Ab Global and Qs Global 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 Qs Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ab Global Risk and Qs Global Equity, you can compare the effects of market volatilities on Ab Global and Qs Global 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 Qs Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Global and Qs Global.
Diversification Opportunities for Ab Global and Qs Global
The 3 months correlation between CABIX and SMYIX is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Ab Global Risk and Qs Global Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qs Global Equity 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 Risk are associated (or correlated) with Qs Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qs Global Equity has no effect on the direction of Ab Global i.e., Ab Global and Qs Global go up and down completely randomly.
Assuming the 90 days horizon Ab Global is expected to generate 3.28 times less return on investment than Qs Global. But when comparing it to its historical volatility, Ab Global Risk is 1.41 times less risky than Qs Global. It trades about 0.05 of its potential returns per unit of risk. Qs Global Equity is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,215 in Qs Global Equity on March 6, 2024 and sell it today you would earn a total of 105.00 from holding Qs Global Equity or generate 4.74% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Ab Global Risk are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Ab Global 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 Qs Global Equity are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Qs Global is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.