Correlation Between Global Dividend and Dividend Growth

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

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

Diversification Opportunities for Global Dividend and Dividend Growth

0.91

Correlation Coefficient

Global Dividend  Dividend Growth

Almost no diversification

The 3 months correlation between Global and Dividend is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Global Dividend Growth and Dividend Growth Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dividend Growth Split and Global 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 Global Dividend Growth are associated (or correlated) with Dividend Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dividend Growth Split has no effect on the direction of Global Dividend i.e., Global Dividend and Dividend Growth go up and down completely randomly.

Pair Corralation between Global Dividend and Dividend Growth

Assuming the 90 days trading horizon Global Dividend Growth is expected to under-perform the Dividend Growth. But the etf apears to be less risky and, when comparing its historical volatility, Global Dividend Growth is 1.03 times less risky than Dividend Growth. The etf trades about -0.07 of its potential returns per unit of risk. The Dividend Growth Split is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  662.00  in Dividend Growth Split on December 30, 2024 and sell it today you would lose (26.00) from holding Dividend Growth Split or give up 3.93% of portfolio value over 90 days.

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

Global Dividend Growth  vs.  Dividend Growth Split

Global Dividend Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global Dividend Growth has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Dividend Growth Split

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dividend Growth Split has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Dividend Growth is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Global Dividend and Dividend Growth

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

The idea behind Global Dividend Growth and Dividend Growth Split 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.