Correlation Between FT Cboe and AB Conservative

Can any of the company-specific risk be diversified away by investing in both FT Cboe and AB Conservative 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 FT Cboe and AB Conservative into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FT Cboe Vest and AB Conservative Buffer, you can compare the effects of market volatilities on FT Cboe and AB Conservative 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 FT Cboe with a short position of AB Conservative. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT Cboe and AB Conservative.

Diversification Opportunities for FT Cboe and AB Conservative

0.85

Correlation Coefficient

FT Cboe  AB Conservative

Very poor diversification

The 3 months correlation between BUFD and BUFC is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding FT Cboe Vest and AB Conservative Buffer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Conservative Buffer and FT Cboe 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 FT Cboe Vest are associated (or correlated) with AB Conservative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Conservative Buffer has no effect on the direction of FT Cboe i.e., FT Cboe and AB Conservative go up and down completely randomly.

Pair Corralation between FT Cboe and AB Conservative

Given the investment horizon of 90 days FT Cboe Vest is expected to generate 1.06 times more return on investment than AB Conservative. However, FT Cboe is 1.06 times more volatile than AB Conservative Buffer. It trades about 0.21 of its potential returns per unit of risk. AB Conservative Buffer is currently generating about 0.17 per unit of risk. If you would invest  2,362  in FT Cboe Vest on February 6, 2025 and sell it today you would earn a total of  130.00  from holding FT Cboe Vest or generate 5.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

FT Cboe Vest  vs.  AB Conservative Buffer

FT Cboe Vest

Risk-Adjusted Performance

Very Weak

Over the last 90 days FT Cboe Vest has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, FT Cboe is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

AB Conservative Buffer

Risk-Adjusted Performance

Very Weak

Over the last 90 days AB Conservative Buffer has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, AB Conservative is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with FT Cboe and AB Conservative

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

The idea behind FT Cboe Vest and AB Conservative Buffer 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.