Correlation Between Capital Growth and Global Managed

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

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

Diversification Opportunities for Capital Growth and Global Managed

0.95

Correlation Coefficient

Capital Growth  Global Managed

Almost no diversification

The 3 months correlation between Capital and Global is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Capital Growth Fund and Global Managed Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Managed Volatility and Capital Growth 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 Capital Growth Fund are associated (or correlated) with Global Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Managed Volatility has no effect on the direction of Capital Growth i.e., Capital Growth and Global Managed go up and down completely randomly.

Pair Corralation between Capital Growth and Global Managed

Assuming the 90 days horizon Capital Growth Fund is expected to under-perform the Global Managed. In addition to that, Capital Growth is 2.17 times more volatile than Global Managed Volatility. It trades about -0.29 of its total potential returns per unit of risk. Global Managed Volatility is currently generating about -0.28 per unit of volatility. If you would invest  1,184  in Global Managed Volatility on October 8, 2024 and sell it today you would lose (69.00) from holding Global Managed Volatility or give up 5.83% of portfolio value over 90 days.

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

Capital Growth Fund  vs.  Global Managed Volatility

Capital Growth

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Global Managed Volatility

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with Capital Growth and Global Managed

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

The idea behind Capital Growth Fund and Global Managed Volatility 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.