Correlation Between Global Opportunity and Value Line

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

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

Diversification Opportunities for Global Opportunity and Value Line

0.86

Correlation Coefficient

Global Opportunity  Value Line

Very poor diversification

The 3 months correlation between Global and Value is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Global Opportunity Portfolio and Value Line Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Line Asset and Global Opportunity 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 Opportunity Portfolio are associated (or correlated) with Value Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Line Asset has no effect on the direction of Global Opportunity i.e., Global Opportunity and Value Line go up and down completely randomly.

Pair Corralation between Global Opportunity and Value Line

Assuming the 90 days horizon Global Opportunity Portfolio is expected to under-perform the Value Line. In addition to that, Global Opportunity is 2.34 times more volatile than Value Line Asset. It trades about -0.01 of its total potential returns per unit of risk. Value Line Asset is currently generating about 0.02 per unit of volatility. If you would invest  4,073  in Value Line Asset on December 29, 2024 and sell it today you would earn a total of  20.00  from holding Value Line Asset or generate 0.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Global Opportunity Portfolio  vs.  Value Line Asset

Global Opportunity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global Opportunity Portfolio has generated negative risk-adjusted returns adding no value to fund investors. 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.

Value Line Asset

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Value Line Asset are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Value Line 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 Opportunity and Value Line

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

The idea behind Global Opportunity Portfolio and Value Line Asset 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..