Correlation Between Scharf Global and Global Core

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

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

Diversification Opportunities for Scharf Global and Global Core

0.71

Correlation Coefficient

Scharf Global  Global Core

Poor diversification

The 3 months correlation between Scharf and Global is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Scharf Global Opportunity and Global E Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global E Portfolio and Scharf 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 Scharf Global Opportunity are associated (or correlated) with Global Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global E Portfolio has no effect on the direction of Scharf Global i.e., Scharf Global and Global Core go up and down completely randomly.

Pair Corralation between Scharf Global and Global Core

Assuming the 90 days horizon Scharf Global Opportunity is expected to under-perform the Global Core. But the mutual fund apears to be less risky and, when comparing its historical volatility, Scharf Global Opportunity is 1.12 times less risky than Global Core. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Global E Portfolio is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,985  in Global E Portfolio on October 23, 2024 and sell it today you would earn a total of  33.00  from holding Global E Portfolio or generate 1.66% return on investment over 90 days.

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

Scharf Global Opportunity  vs.  Global E Portfolio

Scharf Global Opportunity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Global E Portfolio

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global E Portfolio are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Global Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Scharf Global and Global Core

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

The idea behind Scharf Global Opportunity and Global E 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.