Correlation Between James Alpha and Global Opportunity

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

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

Diversification Opportunities for James Alpha and Global Opportunity

0.6

Correlation Coefficient

James Alpha  Global Opportunity

Poor diversification

The 3 months correlation between James and Global is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding James Alpha Global and Global Opportunity Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Opportunity and James Alpha 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 James Alpha Global are associated (or correlated) with Global Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Opportunity has no effect on the direction of James Alpha i.e., James Alpha and Global Opportunity go up and down completely randomly.

Pair Corralation between James Alpha and Global Opportunity

Assuming the 90 days horizon James Alpha Global is expected to generate 0.69 times more return on investment than Global Opportunity. However, James Alpha Global is 1.46 times less risky than Global Opportunity. It trades about 0.06 of its potential returns per unit of risk. Global Opportunity Portfolio is currently generating about 0.02 per unit of risk. If you would invest  1,323  in James Alpha Global on December 22, 2024 and sell it today you would earn a total of  41.00  from holding James Alpha Global or generate 3.1% return on investment over 90 days.

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

James Alpha Global  vs.  Global Opportunity Portfolio

James Alpha Global

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in James Alpha Global are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, James Alpha is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Global Opportunity

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global Opportunity Portfolio are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Global Opportunity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with James Alpha and Global Opportunity

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

The idea behind James Alpha Global and Global Opportunity Portfolio 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.