Correlation Between Global Strategist and Small Company

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

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

Diversification Opportunities for Global Strategist and Small Company

0.05

Correlation Coefficient

Global Strategist  Small Company

Significant diversification

The 3 months correlation between Global and Small is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Global Strategist Portfolio and Small Pany Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Pany Growth and Global Strategist 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 Strategist Portfolio are associated (or correlated) with Small Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Pany Growth has no effect on the direction of Global Strategist i.e., Global Strategist and Small Company go up and down completely randomly.

Pair Corralation between Global Strategist and Small Company

Assuming the 90 days horizon Global Strategist Portfolio is expected to generate 0.25 times more return on investment than Small Company. However, Global Strategist Portfolio is 3.96 times less risky than Small Company. It trades about 0.07 of its potential returns per unit of risk. Small Pany Growth is currently generating about -0.08 per unit of risk. If you would invest  1,779  in Global Strategist Portfolio on December 21, 2024 and sell it today you would earn a total of  41.00  from holding Global Strategist Portfolio or generate 2.3% return on investment over 90 days.

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

Global Strategist Portfolio  vs.  Small Pany Growth

Global Strategist

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global Strategist Portfolio are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Global Strategist is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Small Pany Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Pany Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Global Strategist and Small Company

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

The idea behind Global Strategist Portfolio and Small Pany Growth 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.