Correlation Between Us Equity and Global Alpha
Can any of the company-specific risk be diversified away by investing in both Us Equity and Global Alpha 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 Equity and Global Alpha into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Equity Growth and The Global Alpha, you can compare the effects of market volatilities on Us Equity and Global Alpha 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 Equity with a short position of Global Alpha. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Equity and Global Alpha.
Diversification Opportunities for Us Equity and Global Alpha
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BGGSX and Global is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding The Equity Growth and The Global Alpha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Alpha and Us Equity 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 The Equity Growth are associated (or correlated) with Global Alpha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Alpha has no effect on the direction of Us Equity i.e., Us Equity and Global Alpha go up and down completely randomly.
Pair Corralation between Us Equity and Global Alpha
Assuming the 90 days horizon The Equity Growth is expected to generate 1.77 times more return on investment than Global Alpha. However, Us Equity is 1.77 times more volatile than The Global Alpha. It trades about 0.35 of its potential returns per unit of risk. The Global Alpha is currently generating about 0.1 per unit of risk. If you would invest 2,451 in The Equity Growth on August 31, 2024 and sell it today you would earn a total of 289.00 from holding The Equity Growth or generate 11.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Equity Growth vs. The Global Alpha
Performance |
| Timeline |
| Equity Growth |
| Global Alpha |
Us Equity and Global Alpha Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Us Equity and Global Alpha
The main advantage of trading using opposite Us Equity and Global Alpha positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Equity position performs unexpectedly, Global Alpha 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 Alpha will offset losses from the drop in Global Alpha's long position.| Us Equity vs. Quantitative Longshort Equity | Us Equity vs. Vanguard Institutional Short Term | Us Equity vs. Siit Ultra Short | Us Equity vs. Touchstone Ultra Short |
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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