Correlation Between Smead Value and Global Concentrated

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

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

Diversification Opportunities for Smead Value and Global Concentrated

0.2

Correlation Coefficient

Smead Value  Global Concentrated

Modest diversification

The 3 months correlation between Smead and Global is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Smead Value Fund 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 Smead Value 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 Smead Value Fund 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 Smead Value i.e., Smead Value and Global Concentrated go up and down completely randomly.

Pair Corralation between Smead Value and Global Concentrated

Assuming the 90 days horizon Smead Value Fund is expected to under-perform the Global Concentrated. In addition to that, Smead Value is 1.07 times more volatile than Global Centrated Portfolio. It trades about -0.36 of its total potential returns per unit of risk. Global Centrated Portfolio is currently generating about -0.28 per unit of volatility. If you would invest  2,440  in Global Centrated Portfolio on October 3, 2024 and sell it today you would lose (125.00) from holding Global Centrated Portfolio or give up 5.12% of portfolio value over 90 days.

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

Smead Value Fund  vs.  Global Centrated Portfolio

Smead Value Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smead Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's essential 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

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global Centrated Portfolio are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic 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 Smead Value and Global Concentrated

The main advantage of trading using opposite Smead Value and Global Concentrated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smead Value 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 Smead Value Fund 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.