Correlation Between Enhanced and Absolute Capital

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

Diversification Opportunities for Enhanced and Absolute Capital

0.96
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Enhanced and Absolute is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding ENHANCED US LARGE and ABSOLUTE CAPITAL DEFENDER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Capital Defender and Enhanced 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 Enhanced Us Large are associated (or correlated) with Absolute Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Capital Defender has no effect on the direction of Enhanced i.e., Enhanced and Absolute Capital go up and down completely randomly.

Pair Corralation between Enhanced and Absolute Capital

Assuming the 90 days horizon Enhanced Us Large is expected to generate 1.92 times more return on investment than Absolute Capital. However, Enhanced is 1.92 times more volatile than Absolute Capital Defender. It trades about 0.16 of its potential returns per unit of risk. Absolute Capital Defender is currently generating about 0.15 per unit of risk. If you would invest  1,269  in Enhanced Us Large on November 24, 2023 and sell it today you would earn a total of  32.00  from holding Enhanced Us Large or generate 2.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

ENHANCED US LARGE  vs.  ABSOLUTE CAPITAL DEFENDER

 Performance 
       Timeline  
Enhanced Us Large 

Risk-Adjusted Performance

15 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Enhanced Us Large are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly sluggish essential indicators, Enhanced may actually be approaching a critical reversion point that can send shares even higher in March 2024.
Absolute Capital Defender 

Risk-Adjusted Performance

17 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Absolute Capital Defender are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Absolute Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Enhanced and Absolute Capital Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Enhanced and Absolute Capital

The main advantage of trading using opposite Enhanced and Absolute Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enhanced position performs unexpectedly, Absolute Capital 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 Absolute Capital will offset losses from the drop in Absolute Capital's long position.
The idea behind Enhanced Us Large and Absolute Capital Defender 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.
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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 Stocks Directory module to find actively traded stocks across global markets.

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