Correlation Between Moderate Balanced and Ab Select

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

Diversification Opportunities for Moderate Balanced and Ab Select

0.95
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Moderate and AUUIX is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Moderate Balanced Allocation and Ab Select Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Select Equity and Moderate Balanced 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 Moderate Balanced Allocation are associated (or correlated) with Ab Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Select Equity has no effect on the direction of Moderate Balanced i.e., Moderate Balanced and Ab Select go up and down completely randomly.

Pair Corralation between Moderate Balanced and Ab Select

Assuming the 90 days horizon Moderate Balanced is expected to generate 1.32 times less return on investment than Ab Select. But when comparing it to its historical volatility, Moderate Balanced Allocation is 1.46 times less risky than Ab Select. It trades about 0.39 of its potential returns per unit of risk. Ab Select Equity is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  2,247  in Ab Select Equity on April 9, 2025 and sell it today you would earn a total of  94.00  from holding Ab Select Equity or generate 4.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Moderate Balanced Allocation  vs.  Ab Select Equity

 Performance 
       Timeline  
Moderate Balanced 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Moderate Balanced Allocation are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Moderate Balanced may actually be approaching a critical reversion point that can send shares even higher in August 2025.
Ab Select Equity 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Ab Select Equity are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Ab Select showed solid returns over the last few months and may actually be approaching a breakup point.

Moderate Balanced and Ab Select Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Moderate Balanced and Ab Select

The main advantage of trading using opposite Moderate Balanced and Ab Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Moderate Balanced position performs unexpectedly, Ab Select 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 Ab Select will offset losses from the drop in Ab Select's long position.
The idea behind Moderate Balanced Allocation and Ab Select Equity 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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