Correlation Between CoreShares TotalWldStock and Allan Gray

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

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

Diversification Opportunities for CoreShares TotalWldStock and Allan Gray

0.49

Correlation Coefficient

CoreShares TotalWldStock  Allan Gray

Very weak diversification

The 3 months correlation between CoreShares and Allan is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding CoreShares TotalWldStock ETF and Allan Gray Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allan Gray Equity and CoreShares TotalWldStock 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 CoreShares TotalWldStock ETF are associated (or correlated) with Allan Gray. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allan Gray Equity has no effect on the direction of CoreShares TotalWldStock i.e., CoreShares TotalWldStock and Allan Gray go up and down completely randomly.

Pair Corralation between CoreShares TotalWldStock and Allan Gray

Assuming the 90 days trading horizon CoreShares TotalWldStock ETF is expected to generate 1.85 times more return on investment than Allan Gray. However, CoreShares TotalWldStock is 1.85 times more volatile than Allan Gray Equity. It trades about 0.12 of its potential returns per unit of risk. Allan Gray Equity is currently generating about -0.01 per unit of risk. If you would invest  150,600  in CoreShares TotalWldStock ETF on October 10, 2024 and sell it today you would earn a total of  9,800  from holding CoreShares TotalWldStock ETF or generate 6.51% return on investment over 90 days.

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

CoreShares TotalWldStock ETF  vs.  Allan Gray Equity

CoreShares TotalWldStock

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CoreShares TotalWldStock ETF are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, CoreShares TotalWldStock may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Allan Gray Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allan Gray Equity has generated negative risk-adjusted returns adding no value to fund investors. Despite fairly strong basic indicators, Allan Gray is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with CoreShares TotalWldStock and Allan Gray

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

The idea behind CoreShares TotalWldStock ETF and Allan Gray 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.

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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.