Correlation Between Glg Intl and Ultralatin America

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

By analyzing existing cross correlation between Glg Intl Small and Ultralatin America Profund, you can compare the effects of market volatilities on Glg Intl and Ultralatin America 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 Glg Intl with a short position of Ultralatin America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Glg Intl and Ultralatin America.

Diversification Opportunities for Glg Intl and Ultralatin America

0.18

Correlation Coefficient

Glg Intl  Ultralatin America

Average diversification

The 3 months correlation between Glg and Ultralatin is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Glg Intl Small and Ultralatin America Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultralatin America and Glg Intl 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 Glg Intl Small are associated (or correlated) with Ultralatin America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultralatin America has no effect on the direction of Glg Intl i.e., Glg Intl and Ultralatin America go up and down completely randomly.

Pair Corralation between Glg Intl and Ultralatin America

Assuming the 90 days horizon Glg Intl is expected to generate 1.96 times less return on investment than Ultralatin America. But when comparing it to its historical volatility, Glg Intl Small is 2.19 times less risky than Ultralatin America. It trades about 0.01 of its potential returns per unit of risk. Ultralatin America Profund is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,382  in Ultralatin America Profund on December 21, 2024 and sell it today you would earn a total of  7.00  from holding Ultralatin America Profund or generate 0.51% return on investment over 90 days.

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

Glg Intl Small  vs.  Ultralatin America Profund

Glg Intl Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Glg Intl Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Glg Intl is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ultralatin America

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ultralatin America Profund are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ultralatin America showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Glg Intl and Ultralatin America

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

The idea behind Glg Intl Small and Ultralatin America Profund 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..