Correlation Between Us Global and Us Targeted

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

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

Diversification Opportunities for Us Global and Us Targeted

0.75

Correlation Coefficient

Us Global  Us Targeted

Poor diversification

The 3 months correlation between USGLX and DFFVX is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Us Global Leaders and Us Targeted Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Targeted Value and Us Global 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 Us Global Leaders are associated (or correlated) with Us Targeted. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Targeted Value has no effect on the direction of Us Global i.e., Us Global and Us Targeted go up and down completely randomly.

Pair Corralation between Us Global and Us Targeted

Assuming the 90 days horizon Us Global Leaders is expected to generate 0.88 times more return on investment than Us Targeted. However, Us Global Leaders is 1.14 times less risky than Us Targeted. It trades about -0.05 of its potential returns per unit of risk. Us Targeted Value is currently generating about -0.1 per unit of risk. If you would invest  6,393  in Us Global Leaders on December 28, 2024 and sell it today you would lose (203.00) from holding Us Global Leaders or give up 3.18% of portfolio value over 90 days.

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

Us Global Leaders  vs.  Us Targeted Value

Us Global Leaders

Risk-Adjusted Performance

Very Weak

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

Us Targeted Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Us Targeted Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Us Global and Us Targeted

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

The idea behind Us Global Leaders and Us Targeted Value 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.