Correlation Between Global Equity and Fa 529

Can any of the company-specific risk be diversified away by investing in both Global Equity and Fa 529 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 Global Equity and Fa 529 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global Equity Fund and Fa 529 Aggressive, you can compare the effects of market volatilities on Global Equity and Fa 529 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 Global Equity with a short position of Fa 529. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Equity and Fa 529.

Diversification Opportunities for Global Equity and Fa 529

0.66

Correlation Coefficient

Global Equity  Fa 529

Poor diversification

The 3 months correlation between Global and FFCGX is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Global Equity Fund and Fa 529 Aggressive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fa 529 Aggressive and Global Equity 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 Global Equity Fund are associated (or correlated) with Fa 529. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fa 529 Aggressive has no effect on the direction of Global Equity i.e., Global Equity and Fa 529 go up and down completely randomly.

Pair Corralation between Global Equity and Fa 529

Assuming the 90 days horizon Global Equity Fund is expected to under-perform the Fa 529. But the mutual fund apears to be less risky and, when comparing its historical volatility, Global Equity Fund is 1.36 times less risky than Fa 529. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Fa 529 Aggressive is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  3,950  in Fa 529 Aggressive on September 20, 2024 and sell it today you would lose (46.00) from holding Fa 529 Aggressive or give up 1.16% of portfolio value over 90 days.

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

Global Equity Fund  vs.  Fa 529 Aggressive

Global Equity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fa 529 Aggressive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fa 529 Aggressive has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Fa 529 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global Equity and Fa 529

The main advantage of trading using opposite Global Equity and Fa 529 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Equity position performs unexpectedly, Fa 529 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 Fa 529 will offset losses from the drop in Fa 529's long position.

The idea behind Global Equity Fund and Fa 529 Aggressive 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.