Correlation Between Strategic Allocation: and Global Gold

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

By analyzing existing cross correlation between Strategic Allocation Moderate and Global Gold Fund, you can compare the effects of market volatilities on Strategic Allocation: and Global Gold 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 Strategic Allocation: with a short position of Global Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Allocation: and Global Gold.

Diversification Opportunities for Strategic Allocation: and Global Gold

0.09

Correlation Coefficient

Strategic Allocation:  Global Gold

Significant diversification

The 3 months correlation between Strategic and Global is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Allocation Moderate and Global Gold Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Gold Fund and Strategic Allocation: 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 Strategic Allocation Moderate are associated (or correlated) with Global Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Gold Fund has no effect on the direction of Strategic Allocation: i.e., Strategic Allocation: and Global Gold go up and down completely randomly.

Pair Corralation between Strategic Allocation: and Global Gold

Assuming the 90 days horizon Strategic Allocation: is expected to generate 110.84 times less return on investment than Global Gold. But when comparing it to its historical volatility, Strategic Allocation Moderate is 2.73 times less risky than Global Gold. It trades about 0.01 of its potential returns per unit of risk. Global Gold Fund is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  1,186  in Global Gold Fund on December 22, 2024 and sell it today you would earn a total of  380.00  from holding Global Gold Fund or generate 32.04% return on investment over 90 days.

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

Strategic Allocation Moderate  vs.  Global Gold Fund

Strategic Allocation:

Risk-Adjusted Performance

Very Weak

Over the last 90 days Strategic Allocation Moderate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Strategic Allocation: is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Global Gold Fund

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global Gold Fund are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Global Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Strategic Allocation: and Global Gold

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

The idea behind Strategic Allocation Moderate and Global Gold Fund 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.