Correlation Between Ab All and Small Cap
Can any of the company-specific risk be diversified away by investing in both Ab All and Small 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 All and Small Cap 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 Small Cap Core, you can compare the effects of market volatilities on Ab All and Small 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 All with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab All and Small Cap.
Diversification Opportunities for Ab All and Small Cap
Very weak diversification
The 3 months correlation between AMTAX and Small is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Ab All Market and Small Cap Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Core 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 Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Core has no effect on the direction of Ab All i.e., Ab All and Small Cap go up and down completely randomly.
Pair Corralation between Ab All and Small Cap
Assuming the 90 days horizon Ab All is expected to generate 1.98 times less return on investment than Small Cap. But when comparing it to its historical volatility, Ab All Market is 2.37 times less risky than Small Cap. It trades about 0.31 of its potential returns per unit of risk. Small Cap Core is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 1,015 in Small Cap Core on April 13, 2025 and sell it today you would earn a total of 198.00 from holding Small Cap Core or generate 19.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ab All Market vs. Small Cap Core
Performance |
| Timeline |
| Ab All Market |
| Small Cap Core |
Ab All and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ab All and Small Cap
The main advantage of trading using opposite Ab All and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab All position performs unexpectedly, Small 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 Small Cap will offset losses from the drop in Small Cap's long position.| Ab All vs. Blackrock Large Cap | Ab All vs. Neiman Large Cap | Ab All vs. Pax Large Cap | Ab All vs. Aqr Large Cap |
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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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