Correlation Between World Ex and World Core

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

By analyzing existing cross correlation between World Ex Core and World Core Equity, you can compare the effects of market volatilities on World Ex and World Core 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 World Ex with a short position of World Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Ex and World Core.

Diversification Opportunities for World Ex and World Core

0.29

Correlation Coefficient

World Ex  World Core

Modest diversification

The 3 months correlation between World and World is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding World Ex Core and World Core Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Core Equity and World Ex 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 World Ex Core are associated (or correlated) with World Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Core Equity has no effect on the direction of World Ex i.e., World Ex and World Core go up and down completely randomly.

Pair Corralation between World Ex and World Core

Assuming the 90 days horizon World Ex Core is expected to generate 0.91 times more return on investment than World Core. However, World Ex Core is 1.1 times less risky than World Core. It trades about 0.2 of its potential returns per unit of risk. World Core Equity is currently generating about 0.02 per unit of risk. If you would invest  1,297  in World Ex Core on December 19, 2024 and sell it today you would earn a total of  119.00  from holding World Ex Core or generate 9.18% return on investment over 90 days.

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

World Ex Core  vs.  World Core Equity

World Ex Core

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in World Ex Core are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, World Ex may actually be approaching a critical reversion point that can send shares even higher in April 2025.

World Core Equity

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in World Core Equity are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, World Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with World Ex and World Core

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

The idea behind World Ex Core and World Core Equity 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.