Correlation Between Technology Fund and Global Concentrated

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

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

Diversification Opportunities for Technology Fund and Global Concentrated

0.73

Correlation Coefficient

Technology Fund  Global Concentrated

Poor diversification

The 3 months correlation between Technology and Global is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Technology Fund Class and Global Centrated Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Centrated Por and Technology Fund 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 Technology Fund Class are associated (or correlated) with Global Concentrated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Centrated Por has no effect on the direction of Technology Fund i.e., Technology Fund and Global Concentrated go up and down completely randomly.

Pair Corralation between Technology Fund and Global Concentrated

Assuming the 90 days horizon Technology Fund Class is expected to under-perform the Global Concentrated. In addition to that, Technology Fund is 1.36 times more volatile than Global Centrated Portfolio. It trades about -0.08 of its total potential returns per unit of risk. Global Centrated Portfolio is currently generating about -0.01 per unit of volatility. If you would invest  2,389  in Global Centrated Portfolio on December 23, 2024 and sell it today you would lose (35.00) from holding Global Centrated Portfolio or give up 1.47% of portfolio value over 90 days.

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

Technology Fund Class  vs.  Global Centrated Portfolio

Technology Fund Class

Risk-Adjusted Performance

Very Weak

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

Global Centrated Por

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Technology Fund and Global Concentrated

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

The idea behind Technology Fund Class and Global Centrated Portfolio 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.