Correlation Between Sierra E and Global Centrated

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

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

Diversification Opportunities for Sierra E and Global Centrated

0.39

Correlation Coefficient

Sierra E  Global Centrated

Weak diversification

The 3 months correlation between Sierra and Global is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Sierra E Retirement 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 Sierra E 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 Sierra E Retirement are associated (or correlated) with Global Centrated. 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 Sierra E i.e., Sierra E and Global Centrated go up and down completely randomly.

Pair Corralation between Sierra E and Global Centrated

Assuming the 90 days horizon Sierra E is expected to generate 4.68 times less return on investment than Global Centrated. But when comparing it to its historical volatility, Sierra E Retirement is 3.03 times less risky than Global Centrated. It trades about 0.03 of its potential returns per unit of risk. Global Centrated Portfolio is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,255  in Global Centrated Portfolio on September 29, 2024 and sell it today you would earn a total of  121.00  from holding Global Centrated Portfolio or generate 5.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.21%
Values	Daily Returns

Sierra E Retirement  vs.  Global Centrated Portfolio

Sierra E Retirement

Risk-Adjusted Performance

0 of 100

Very Weak

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

Global Centrated Por

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global Centrated Portfolio are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Global Centrated is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sierra E and Global Centrated

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

The idea behind Sierra E Retirement 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.