Correlation Between Global Centrated and Real Assets

Can any of the company-specific risk be diversified away by investing in both Global Centrated and Real Assets 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 Centrated and Real Assets 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 Real Assets Portfolio, you can compare the effects of market volatilities on Global Centrated and Real Assets 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 Centrated with a short position of Real Assets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Centrated and Real Assets.

Diversification Opportunities for Global Centrated and Real Assets

-0.4

Correlation Coefficient

Global Centrated  Real Assets

Very good diversification

The 3 months correlation between Global and Real is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Global Centrated Portfolio and Real Assets Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Assets Portfolio and Global Centrated 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 Real Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Assets Portfolio has no effect on the direction of Global Centrated i.e., Global Centrated and Real Assets go up and down completely randomly.

Pair Corralation between Global Centrated and Real Assets

Assuming the 90 days horizon Global Centrated Portfolio is expected to generate 0.3 times more return on investment than Real Assets. However, Global Centrated Portfolio is 3.37 times less risky than Real Assets. It trades about 0.04 of its potential returns per unit of risk. Real Assets Portfolio is currently generating about -0.22 per unit of risk. If you would invest  2,412  in Global Centrated Portfolio on September 19, 2024 and sell it today you would earn a total of  11.00  from holding Global Centrated Portfolio or generate 0.46% return on investment over 90 days.

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

Global Centrated Portfolio  vs.  Real Assets Portfolio

Global Centrated Por

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global Centrated Portfolio are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Global Centrated is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Real Assets Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Real Assets Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Global Centrated and Real Assets

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

The idea behind Global Centrated Portfolio and Real Assets 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.