Correlation Between Global Resources and Near-term Tax

Can any of the company-specific risk be diversified away by investing in both Global Resources and Near-term Tax 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 Near-term Tax 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 Near Term Tax Free, you can compare the effects of market volatilities on Global Resources and Near-term Tax 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 Near-term Tax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Resources and Near-term Tax.

Diversification Opportunities for Global Resources and Near-term Tax

0.11

Correlation Coefficient

Global Resources  Near-term Tax

Average diversification

The 3 months correlation between Global and Near-term is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Global Resources Fund and Near Term Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Near Term Tax 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 Near-term Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Near Term Tax has no effect on the direction of Global Resources i.e., Global Resources and Near-term Tax go up and down completely randomly.

Pair Corralation between Global Resources and Near-term Tax

Assuming the 90 days horizon Global Resources Fund is expected to generate 7.61 times more return on investment than Near-term Tax. However, Global Resources is 7.61 times more volatile than Near Term Tax Free. It trades about 0.09 of its potential returns per unit of risk. Near Term Tax Free is currently generating about 0.0 per unit of risk. If you would invest  390.00  in Global Resources Fund on September 4, 2024 and sell it today you would earn a total of  19.00  from holding Global Resources Fund or generate 4.87% return on investment over 90 days.

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

Global Resources Fund  vs.  Near Term Tax Free

Global Resources

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global Resources Fund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Global Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Near Term Tax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Near Term Tax Free has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Near-term Tax 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 Resources and Near-term Tax

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

The idea behind Global Resources Fund and Near Term Tax Free 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.