Correlation Between Global Core and Active International

Can any of the company-specific risk be diversified away by investing in both Global Core and Active International 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 Active International 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 Active International Allocation, you can compare the effects of market volatilities on Global Core and Active International 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 Active International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Core and Active International.

Diversification Opportunities for Global Core and Active International

-0.11

Correlation Coefficient

Global Core  Active International

Good diversification

The 3 months correlation between Global and Active is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Global E Portfolio and Active International Allocatio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Active International 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 Active International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Active International has no effect on the direction of Global Core i.e., Global Core and Active International go up and down completely randomly.

Pair Corralation between Global Core and Active International

Assuming the 90 days horizon Global E Portfolio is expected to under-perform the Active International. In addition to that, Global Core is 1.34 times more volatile than Active International Allocation. It trades about -0.03 of its total potential returns per unit of risk. Active International Allocation is currently generating about 0.21 per unit of volatility. If you would invest  1,577  in Active International Allocation on December 27, 2024 and sell it today you would earn a total of  177.00  from holding Active International Allocation or generate 11.22% return on investment over 90 days.

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

Global E Portfolio  vs.  Active International Allocatio

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 forward indicators, Global Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Active International

Risk-Adjusted Performance

Solid

Over the last 90 days Active International Allocation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak basic indicators, Active International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Global Core and Active International

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

The idea behind Global E Portfolio and Active International Allocation 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..