Correlation Between Iaadx and Global Hard

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

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

Diversification Opportunities for Iaadx and Global Hard

0.35

Correlation Coefficient

Iaadx  Global Hard

Weak diversification

The 3 months correlation between Iaadx and Global is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Iaadx and Global Hard Assets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Hard Assets and Iaadx 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 Iaadx are associated (or correlated) with Global Hard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Hard Assets has no effect on the direction of Iaadx i.e., Iaadx and Global Hard go up and down completely randomly.

Pair Corralation between Iaadx and Global Hard

Assuming the 90 days horizon Iaadx is expected to generate 4.42 times less return on investment than Global Hard. But when comparing it to its historical volatility, Iaadx is 4.02 times less risky than Global Hard. It trades about 0.03 of its potential returns per unit of risk. Global Hard Assets is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,952  in Global Hard Assets on September 13, 2024 and sell it today you would earn a total of  50.00  from holding Global Hard Assets or generate 1.27% return on investment over 90 days.

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

Iaadx  vs.  Global Hard Assets

Iaadx

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Iaadx are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Iaadx is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Global Hard Assets

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global Hard Assets are ranked lower than 2 (%) 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.

Pair Trading with Iaadx and Global Hard

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

The idea behind Iaadx and Global Hard Assets 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.

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 Global Correlations module to find global opportunities by holding instruments from different markets.