Correlation Between Real Assets and Global Centrated

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

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

Diversification Opportunities for Real Assets and Global Centrated

-0.26

Correlation Coefficient

Real Assets  Global Centrated

Very good diversification

The 3 months correlation between Real and Global is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Real Assets Portfolio and Global Centrated Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Centrated Por and Real Assets 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 Real Assets Portfolio are associated (or correlated) with Global Centrated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Centrated Por has no effect on the direction of Real Assets i.e., Real Assets and Global Centrated go up and down completely randomly.

Pair Corralation between Real Assets and Global Centrated

Assuming the 90 days horizon Real Assets Portfolio is expected to under-perform the Global Centrated. In addition to that, Real Assets is 2.47 times more volatile than Global Centrated Portfolio. It trades about -0.25 of its total potential returns per unit of risk. Global Centrated Portfolio is currently generating about -0.18 per unit of volatility. If you would invest  2,287  in Global Centrated Portfolio on September 20, 2024 and sell it today you would lose (76.00) from holding Global Centrated Portfolio or give up 3.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Real Assets Portfolio  vs.  Global Centrated Portfolio

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.

Global Centrated Por

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global Centrated Portfolio are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Global Centrated is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Real Assets and Global Centrated

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

The idea behind Real Assets Portfolio and Global Centrated 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.