Correlation Between Core Fixed and Global Advantage

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

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

Diversification Opportunities for Core Fixed and Global Advantage

-0.5

Correlation Coefficient

Core Fixed  Global Advantage

Very good diversification

The 3 months correlation between Core and Global is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Core Fixed Income and Global Advantage Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Advantage Por and Core Fixed 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 Core Fixed Income are associated (or correlated) with Global Advantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Advantage Por has no effect on the direction of Core Fixed i.e., Core Fixed and Global Advantage go up and down completely randomly.

Pair Corralation between Core Fixed and Global Advantage

Assuming the 90 days horizon Core Fixed Income is expected to generate 0.12 times more return on investment than Global Advantage. However, Core Fixed Income is 8.08 times less risky than Global Advantage. It trades about -0.46 of its potential returns per unit of risk. Global Advantage Portfolio is currently generating about -0.13 per unit of risk. If you would invest  685.00  in Core Fixed Income on October 7, 2024 and sell it today you would lose (17.00) from holding Core Fixed Income or give up 2.48% of portfolio value over 90 days.

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

Core Fixed Income  vs.  Global Advantage Portfolio

Core Fixed Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Global Advantage Por

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global Advantage Portfolio are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Global Advantage showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Core Fixed and Global Advantage

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

The idea behind Core Fixed Income and Global Advantage 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.

Check out your portfolio center.

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.