Correlation Between Global Resources and Defense And

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

By analyzing existing cross correlation between Global Resources Fund and Defense And Aerospace, you can compare the effects of market volatilities on Global Resources and Defense And 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 Resources with a short position of Defense And. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Resources and Defense And.

Diversification Opportunities for Global Resources and Defense And

0.75

Correlation Coefficient

Global Resources  Defense And

Poor diversification

The 3 months correlation between Global and Defense is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Global Resources Fund and Defense And Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defense And Aerospace and Global Resources 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 Resources Fund are associated (or correlated) with Defense And. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defense And Aerospace has no effect on the direction of Global Resources i.e., Global Resources and Defense And go up and down completely randomly.

Pair Corralation between Global Resources and Defense And

Assuming the 90 days horizon Global Resources Fund is expected to generate 0.81 times more return on investment than Defense And. However, Global Resources Fund is 1.23 times less risky than Defense And. It trades about -0.09 of its potential returns per unit of risk. Defense And Aerospace is currently generating about -0.21 per unit of risk. If you would invest  388.00  in Global Resources Fund on October 11, 2024 and sell it today you would lose (9.00) from holding Global Resources Fund or give up 2.32% of portfolio value over 90 days.

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

Global Resources Fund  vs.  Defense And Aerospace

Global Resources

Risk-Adjusted Performance

0 of 100

Very Weak

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

Defense And Aerospace

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Defense And Aerospace has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic 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 Resources and Defense And

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

The idea behind Global Resources Fund and Defense And Aerospace 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.