Correlation Between Ab Sustainable and Ab Large

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

By analyzing existing cross correlation between Ab Sustainable Thematic and Ab Large Cap, you can compare the effects of market volatilities on Ab Sustainable and Ab Large 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 Sustainable with a short position of Ab Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Sustainable and Ab Large.

Diversification Opportunities for Ab Sustainable and Ab Large

0.97

Correlation Coefficient

Ab Sustainable  Ab Large

Almost no diversification

The 3 months correlation between SUTZX and APGAX is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Ab Sustainable Thematic and Ab Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Large Cap and Ab Sustainable 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 Sustainable Thematic are associated (or correlated) with Ab Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Large Cap has no effect on the direction of Ab Sustainable i.e., Ab Sustainable and Ab Large go up and down completely randomly.

Pair Corralation between Ab Sustainable and Ab Large

Assuming the 90 days horizon Ab Sustainable is expected to generate 1.62 times less return on investment than Ab Large. But when comparing it to its historical volatility, Ab Sustainable Thematic is 1.05 times less risky than Ab Large. It trades about 0.05 of its potential returns per unit of risk. Ab Large Cap is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  9,045  in Ab Large Cap on March 17, 2025 and sell it today you would earn a total of  778.00  from holding Ab Large Cap or generate 8.6% return on investment over 90 days.

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

Ab Sustainable Thematic  vs.  Ab Large Cap

Ab Sustainable Thematic

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Sustainable Thematic are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ab Sustainable is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ab Large Cap

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Large Cap are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ab Large may actually be approaching a critical reversion point that can send shares even higher in July 2025.

Pair Trading with Ab Sustainable and Ab Large

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

The idea behind Ab Sustainable Thematic and Ab Large Cap 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.