Correlation Between Global Diversified and Smead International

Can any of the company-specific risk be diversified away by investing in both Global Diversified and Smead International 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 Smead International 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 Smead International Value, you can compare the effects of market volatilities on Global Diversified and Smead International 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 Smead International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Diversified and Smead International.

Diversification Opportunities for Global Diversified and Smead International

0.68

Correlation Coefficient

Global Diversified  Smead International

Poor diversification

The 3 months correlation between Global and Smead is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Global Diversified Income and Smead International Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smead International Value 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 Smead International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smead International Value has no effect on the direction of Global Diversified i.e., Global Diversified and Smead International go up and down completely randomly.

Pair Corralation between Global Diversified and Smead International

Assuming the 90 days horizon Global Diversified is expected to generate 3.2 times less return on investment than Smead International. But when comparing it to its historical volatility, Global Diversified Income is 4.61 times less risky than Smead International. It trades about 0.22 of its potential returns per unit of risk. Smead International Value is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  5,507  in Smead International Value on December 2, 2024 and sell it today you would earn a total of  282.00  from holding Smead International Value or generate 5.12% return on investment over 90 days.

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

Global Diversified Income  vs.  Smead International Value

Global Diversified Income

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global Diversified Income 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 Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Smead International Value

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Smead International Value are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Smead International 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 Smead International

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

The idea behind Global Diversified Income and Smead International Value 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.

Check out your portfolio center.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .