Correlation Between Global Hard and Parametric Modity

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

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

Diversification Opportunities for Global Hard and Parametric Modity

0.9

Correlation Coefficient

Global Hard  Parametric Modity

Almost no diversification

The 3 months correlation between GLOBAL and Parametric is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Global Hard Assets and Parametric Modity Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parametric Modity and Global Hard 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 Hard Assets are associated (or correlated) with Parametric Modity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parametric Modity has no effect on the direction of Global Hard i.e., Global Hard and Parametric Modity go up and down completely randomly.

Pair Corralation between Global Hard and Parametric Modity

Assuming the 90 days horizon Global Hard is expected to generate 1.13 times less return on investment than Parametric Modity. In addition to that, Global Hard is 1.04 times more volatile than Parametric Modity Strategy. It trades about 0.08 of its total potential returns per unit of risk. Parametric Modity Strategy is currently generating about 0.09 per unit of volatility. If you would invest  619.00  in Parametric Modity Strategy on September 5, 2024 and sell it today you would earn a total of  30.00  from holding Parametric Modity Strategy or generate 4.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Global Hard Assets  vs.  Parametric Modity Strategy

Global Hard Assets

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global Hard Assets are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Global Hard is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Parametric Modity

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Parametric Modity Strategy are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Parametric Modity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global Hard and Parametric Modity

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

The idea behind Global Hard Assets and Parametric Modity Strategy 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.