Correlation Between World Precious and Global Resources

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

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

Diversification Opportunities for World Precious and Global Resources

0.68

Correlation Coefficient

World Precious  Global Resources

Poor diversification

The 3 months correlation between World and Global is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding World Precious Minerals and Global Resources Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Resources and World Precious 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 World Precious Minerals are associated (or correlated) with Global Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Resources has no effect on the direction of World Precious i.e., World Precious and Global Resources go up and down completely randomly.

Pair Corralation between World Precious and Global Resources

Assuming the 90 days horizon World Precious Minerals is expected to under-perform the Global Resources. In addition to that, World Precious is 1.53 times more volatile than Global Resources Fund. It trades about -0.31 of its total potential returns per unit of risk. Global Resources Fund is currently generating about 0.0 per unit of volatility. If you would invest  413.00  in Global Resources Fund on September 4, 2024 and sell it today you would earn a total of  0.00  from holding Global Resources Fund or generate 0.0% return on investment over 90 days.

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

World Precious Minerals  vs.  Global Resources Fund

World Precious Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Global Resources

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global Resources Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Global Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with World Precious and Global Resources

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

The idea behind World Precious Minerals and Global Resources 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.

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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.