Correlation Between Technology Portfolio and Global Technology

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

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

Diversification Opportunities for Technology Portfolio and Global Technology

0.96

Correlation Coefficient

Technology Portfolio  Global Technology

Almost no diversification

The 3 months correlation between Technology and GLOBAL is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Technology Portfolio Technolog and Global Technology Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Technology and Technology Portfolio 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 Technology Portfolio Technology are associated (or correlated) with Global Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Technology has no effect on the direction of Technology Portfolio i.e., Technology Portfolio and Global Technology go up and down completely randomly.

Pair Corralation between Technology Portfolio and Global Technology

Assuming the 90 days horizon Technology Portfolio Technology is expected to under-perform the Global Technology. In addition to that, Technology Portfolio is 1.22 times more volatile than Global Technology Portfolio. It trades about -0.12 of its total potential returns per unit of risk. Global Technology Portfolio is currently generating about -0.1 per unit of volatility. If you would invest  2,129  in Global Technology Portfolio on December 30, 2024 and sell it today you would lose (218.00) from holding Global Technology Portfolio or give up 10.24% of portfolio value over 90 days.

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

Technology Portfolio Technolog  vs.  Global Technology Portfolio

Technology Portfolio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Technology Portfolio Technology has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Global Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global Technology Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Technology Portfolio and Global Technology

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

The idea behind Technology Portfolio Technology and Global Technology Portfolio 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.