Correlation Between Global Core and The Value

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

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

Diversification Opportunities for Global Core and The Value

0.74

Correlation Coefficient

Global Core  The Value

Poor diversification

The 3 months correlation between Global and The is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Global E Portfolio and The Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Fund and Global Core 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 E Portfolio are associated (or correlated) with The Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Fund has no effect on the direction of Global Core i.e., Global Core and The Value go up and down completely randomly.

Pair Corralation between Global Core and The Value

Assuming the 90 days horizon Global E Portfolio is expected to under-perform the The Value. In addition to that, Global Core is 1.45 times more volatile than The Value Fund. It trades about -0.04 of its total potential returns per unit of risk. The Value Fund is currently generating about 0.02 per unit of volatility. If you would invest  3,199  in The Value Fund on December 28, 2024 and sell it today you would earn a total of  29.00  from holding The Value Fund or generate 0.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Global E Portfolio  vs.  The Value Fund

Global E Portfolio

Risk-Adjusted Performance

Very Weak

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

Value Fund

Risk-Adjusted Performance

Weak

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

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

The idea behind Global E Portfolio and The Value Fund 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 Transaction History module to view history of all your transactions and understand their impact on performance.