Correlation Between Global Diversified and Money Market

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

By analyzing existing cross correlation between Global Diversified Income and Money Market Obligations, you can compare the effects of market volatilities on Global Diversified and Money Market 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 Diversified with a short position of Money Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Diversified and Money Market.

Diversification Opportunities for Global Diversified and Money Market

-0.61

Correlation Coefficient

Global Diversified  Money Market

Excellent diversification

The 3 months correlation between Global and Money is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Global Diversified Income and Money Market Obligations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Money Market Obligations and Global Diversified 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 Diversified Income are associated (or correlated) with Money Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Money Market Obligations has no effect on the direction of Global Diversified i.e., Global Diversified and Money Market go up and down completely randomly.

Pair Corralation between Global Diversified and Money Market

Assuming the 90 days horizon Global Diversified Income is expected to under-perform the Money Market. In addition to that, Global Diversified is 1.47 times more volatile than Money Market Obligations. It trades about -0.08 of its total potential returns per unit of risk. Money Market Obligations is currently generating about 0.12 per unit of volatility. If you would invest  99.00  in Money Market Obligations on September 16, 2024 and sell it today you would earn a total of  1.00  from holding Money Market Obligations or generate 1.01% return on investment over 90 days.

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

Global Diversified Income  vs.  Money Market Obligations

Global Diversified Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Money Market Obligations

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Money Market Obligations are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Money Market 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 Diversified and Money Market

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

The idea behind Global Diversified Income and Money Market Obligations 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.