Correlation Between Aberforth Smaller and Sabre Insurance

Can any of the company-specific risk be diversified away by investing in both Aberforth Smaller and Sabre Insurance 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 Aberforth Smaller and Sabre Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aberforth Smaller Companies and Sabre Insurance Group, you can compare the effects of market volatilities on Aberforth Smaller and Sabre Insurance 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 Aberforth Smaller with a short position of Sabre Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aberforth Smaller and Sabre Insurance.

Diversification Opportunities for Aberforth Smaller and Sabre Insurance

0.82

Correlation Coefficient

Aberforth Smaller  Sabre Insurance

Very poor diversification

The 3 months correlation between Aberforth and Sabre is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Aberforth Smaller Companies and Sabre Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabre Insurance Group and Aberforth Smaller 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 Aberforth Smaller Companies are associated (or correlated) with Sabre Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabre Insurance Group has no effect on the direction of Aberforth Smaller i.e., Aberforth Smaller and Sabre Insurance go up and down completely randomly.

Pair Corralation between Aberforth Smaller and Sabre Insurance

Assuming the 90 days trading horizon Aberforth Smaller is expected to generate 1.1 times less return on investment than Sabre Insurance. But when comparing it to its historical volatility, Aberforth Smaller Companies is 1.64 times less risky than Sabre Insurance. It trades about 0.28 of its potential returns per unit of risk. Sabre Insurance Group is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  12,800  in Sabre Insurance Group on April 24, 2025 and sell it today you would earn a total of  2,080  from holding Sabre Insurance Group or generate 16.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

Aberforth Smaller Companies  vs.  Sabre Insurance Group

Aberforth Smaller

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aberforth Smaller Companies are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Aberforth Smaller exhibited solid returns over the last few months and may actually be approaching a breakup point.

Sabre Insurance Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sabre Insurance Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Sabre Insurance unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aberforth Smaller and Sabre Insurance

The main advantage of trading using opposite Aberforth Smaller and Sabre Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aberforth Smaller position performs unexpectedly, Sabre Insurance 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 Sabre Insurance will offset losses from the drop in Sabre Insurance's long position.

The idea behind Aberforth Smaller Companies and Sabre Insurance Group 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.