Correlation Between Power Global and Absolute Capital
Can any of the company-specific risk be diversified away by investing in both Power Global and Absolute Capital 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 Power Global and Absolute Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Power Global Tactical and Absolute Capital Asset, you can compare the effects of market volatilities on Power Global and Absolute Capital 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 Power Global with a short position of Absolute Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Global and Absolute Capital.
Diversification Opportunities for Power Global and Absolute Capital
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Power and Absolute is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Power Global Tactical and Absolute Capital Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Capital Asset and Power Global 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 Power Global Tactical are associated (or correlated) with Absolute Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Capital Asset has no effect on the direction of Power Global i.e., Power Global and Absolute Capital go up and down completely randomly.
Pair Corralation between Power Global and Absolute Capital
Assuming the 90 days horizon Power Global Tactical is expected to under-perform the Absolute Capital. But the mutual fund apears to be less risky and, when comparing its historical volatility, Power Global Tactical is 1.81 times less risky than Absolute Capital. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Absolute Capital Asset is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 1,091 in Absolute Capital Asset on October 4, 2024 and sell it today you would lose (21.00) from holding Absolute Capital Asset or give up 1.92% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Power Global Tactical vs. Absolute Capital Asset
Performance |
Timeline |
Power Global Tactical |
Absolute Capital Asset |
Power Global and Absolute Capital Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Power Global and Absolute Capital
The main advantage of trading using opposite Power Global and Absolute Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Global position performs unexpectedly, Absolute Capital 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 Absolute Capital will offset losses from the drop in Absolute Capital's long position.Power Global vs. Power Income Fund | ||
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Check out your portfolio center.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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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