Correlation Between Dividend and Global Dividend

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

By analyzing existing cross correlation between Dividend 15 Split and Global Dividend Growth, you can compare the effects of market volatilities on Dividend and Global Dividend 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 Dividend with a short position of Global Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dividend and Global Dividend.

Diversification Opportunities for Dividend and Global Dividend

0.93

Correlation Coefficient

Dividend  Global Dividend

Almost no diversification

The 3 months correlation between Dividend and Global is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Dividend 15 Split and Global Dividend Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Dividend Growth and Dividend 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 Dividend 15 Split are associated (or correlated) with Global Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Dividend Growth has no effect on the direction of Dividend i.e., Dividend and Global Dividend go up and down completely randomly.

Pair Corralation between Dividend and Global Dividend

Assuming the 90 days horizon Dividend 15 Split is expected to generate 0.99 times more return on investment than Global Dividend. However, Dividend 15 Split is 1.01 times less risky than Global Dividend. It trades about 0.46 of its potential returns per unit of risk. Global Dividend Growth is currently generating about 0.29 per unit of risk. If you would invest  497.00  in Dividend 15 Split on September 2, 2024 and sell it today you would earn a total of  163.00  from holding Dividend 15 Split or generate 32.8% return on investment over 90 days.

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

Dividend 15 Split  vs.  Global Dividend Growth

Dividend 15 Split

Risk-Adjusted Performance

36 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Dividend 15 Split are ranked lower than 36 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Dividend displayed solid returns over the last few months and may actually be approaching a breakup point.

Global Dividend Growth

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global Dividend Growth are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Global Dividend displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dividend and Global Dividend

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

The idea behind Dividend 15 Split and Global Dividend Growth 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.