Correlation Between Global Concentrated and Global Core

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

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

Diversification Opportunities for Global Concentrated and Global Core

0.99

Correlation Coefficient

Global Concentrated  Global Core

No risk reduction

The 3 months correlation between Global and Global is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Global Centrated Portfolio and Global E Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global E Portfolio and Global Concentrated 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 Centrated Portfolio are associated (or correlated) with Global Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global E Portfolio has no effect on the direction of Global Concentrated i.e., Global Concentrated and Global Core go up and down completely randomly.

Pair Corralation between Global Concentrated and Global Core

Assuming the 90 days horizon Global Centrated Portfolio is expected to generate 1.09 times more return on investment than Global Core. However, Global Concentrated is 1.09 times more volatile than Global E Portfolio. It trades about 0.16 of its potential returns per unit of risk. Global E Portfolio is currently generating about 0.18 per unit of risk. If you would invest  2,141  in Global Centrated Portfolio on September 1, 2024 and sell it today you would earn a total of  185.00  from holding Global Centrated Portfolio or generate 8.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Global Centrated Portfolio  vs.  Global E Portfolio

Global Centrated Por

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Centrated Portfolio are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Global Concentrated may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Global E Portfolio

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global E Portfolio are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Global Core may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Global Concentrated and Global Core

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

The idea behind Global Centrated Portfolio and Global E Portfolio 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.