Correlation Between Polar Capital and Global Opportunities

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

By analyzing existing cross correlation between Polar Capital Funds and Global Opportunities Trust, you can compare the effects of market volatilities on Polar Capital and Global Opportunities 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 Polar Capital with a short position of Global Opportunities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Polar Capital and Global Opportunities.

Diversification Opportunities for Polar Capital and Global Opportunities

-0.38

Correlation Coefficient

Polar Capital  Global Opportunities

Very good diversification

The 3 months correlation between Polar and Global is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Polar Capital Funds and Global Opportunities Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Opportunities and Polar Capital 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 Polar Capital Funds are associated (or correlated) with Global Opportunities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Opportunities has no effect on the direction of Polar Capital i.e., Polar Capital and Global Opportunities go up and down completely randomly.

Pair Corralation between Polar Capital and Global Opportunities

Assuming the 90 days trading horizon Polar Capital Funds is expected to generate 0.54 times more return on investment than Global Opportunities. However, Polar Capital Funds is 1.84 times less risky than Global Opportunities. It trades about 0.09 of its potential returns per unit of risk. Global Opportunities Trust is currently generating about -0.05 per unit of risk. If you would invest  34,263  in Polar Capital Funds on October 1, 2024 and sell it today you would earn a total of  1,436  from holding Polar Capital Funds or generate 4.19% return on investment over 90 days.

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

Polar Capital Funds  vs.  Global Opportunities Trust

Polar Capital Funds

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Polar Capital Funds are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Polar Capital is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Global Opportunities

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Polar Capital and Global Opportunities

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

The idea behind Polar Capital Funds and Global Opportunities Trust 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.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.