Correlation Between Global Advantage and Global Absolute

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

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

Diversification Opportunities for Global Advantage and Global Absolute

0.22

Correlation Coefficient

Global Advantage  Global Absolute

Modest diversification

The 3 months correlation between Global and Global is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Global Advantage Portfolio and Global Absolute Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Absolute Return and Global Advantage 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 Advantage Portfolio are associated (or correlated) with Global Absolute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Absolute Return has no effect on the direction of Global Advantage i.e., Global Advantage and Global Absolute go up and down completely randomly.

Pair Corralation between Global Advantage and Global Absolute

Assuming the 90 days horizon Global Advantage Portfolio is expected to generate 4.99 times more return on investment than Global Absolute. However, Global Advantage is 4.99 times more volatile than Global Absolute Return. It trades about 0.08 of its potential returns per unit of risk. Global Absolute Return is currently generating about 0.04 per unit of risk. If you would invest  761.00  in Global Advantage Portfolio on October 22, 2024 and sell it today you would earn a total of  715.00  from holding Global Advantage Portfolio or generate 93.96% return on investment over 90 days.

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

Global Advantage Portfolio  vs.  Global Absolute Return

Global Advantage Por

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global Advantage Portfolio are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Global Advantage showed solid returns over the last few months and may actually be approaching a breakup point.

Global Absolute Return

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Absolute Return has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Global Absolute is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global Advantage and Global Absolute

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

The idea behind Global Advantage Portfolio and Global Absolute Return 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 Transaction History module to view history of all your transactions and understand their impact on performance.