Correlation Between Global Strategist and Global Absolute

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

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

Diversification Opportunities for Global Strategist and Global Absolute

0.77

Correlation Coefficient

Global Strategist  Global Absolute

Poor diversification

The 3 months correlation between Global and Global is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Global Strategist Portfolio and Global Absolute Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Absolute Return and Global Strategist 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 Strategist Portfolio are associated (or correlated) with Global Absolute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Absolute Return has no effect on the direction of Global Strategist i.e., Global Strategist and Global Absolute go up and down completely randomly.

Pair Corralation between Global Strategist and Global Absolute

Assuming the 90 days horizon Global Strategist Portfolio is expected to generate 1.32 times more return on investment than Global Absolute. However, Global Strategist is 1.32 times more volatile than Global Absolute Return. It trades about 0.05 of its potential returns per unit of risk. Global Absolute Return is currently generating about 0.02 per unit of risk. If you would invest  1,646  in Global Strategist Portfolio on October 7, 2024 and sell it today you would earn a total of  101.00  from holding Global Strategist Portfolio or generate 6.14% return on investment over 90 days.

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

Global Strategist Portfolio  vs.  Global Absolute Return

Global Strategist

Risk-Adjusted Performance

0 of 100

Very Weak

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

Global Absolute Return

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Absolute Return has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Global Absolute 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 Strategist and Global Absolute

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

The idea behind Global Strategist Portfolio and Global Absolute Return 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.