Correlation Between Global Managed and Capital Growth

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

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

Diversification Opportunities for Global Managed and Capital Growth

0.72

Correlation Coefficient

Global Managed  Capital Growth

Poor diversification

The 3 months correlation between GLOBAL and Capital is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Global Managed Volatility and Capital Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Growth and Global Managed 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 Managed Volatility are associated (or correlated) with Capital Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Growth has no effect on the direction of Global Managed i.e., Global Managed and Capital Growth go up and down completely randomly.

Pair Corralation between Global Managed and Capital Growth

Assuming the 90 days horizon Global Managed Volatility is expected to under-perform the Capital Growth. But the mutual fund apears to be less risky and, when comparing its historical volatility, Global Managed Volatility is 1.09 times less risky than Capital Growth. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Capital Growth Fund is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,282  in Capital Growth Fund on December 21, 2024 and sell it today you would lose (4.00) from holding Capital Growth Fund or give up 0.31% of portfolio value over 90 days.

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

Global Managed Volatility  vs.  Capital Growth Fund

Global Managed Volatility

Risk-Adjusted Performance

Very Weak

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

Capital Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capital Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Capital Growth 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 Managed and Capital Growth

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

The idea behind Global Managed Volatility and Capital Growth Fund 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..