Correlation Between Commonwealth Global and Global Hard
Can any of the company-specific risk be diversified away by investing in both Commonwealth Global and Global Hard 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 Commonwealth Global and Global Hard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Global Fund and Global Hard Assets, you can compare the effects of market volatilities on Commonwealth Global and Global Hard 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 Commonwealth Global with a short position of Global Hard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Global and Global Hard.
Diversification Opportunities for Commonwealth Global and Global Hard
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Commonwealth and Global is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Global Fund and Global Hard Assets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Hard Assets and Commonwealth 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 Commonwealth Global Fund are associated (or correlated) with Global Hard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Hard Assets has no effect on the direction of Commonwealth Global i.e., Commonwealth Global and Global Hard go up and down completely randomly.
Pair Corralation between Commonwealth Global and Global Hard
Assuming the 90 days horizon Commonwealth Global is expected to generate 1.06 times less return on investment than Global Hard. But when comparing it to its historical volatility, Commonwealth Global Fund is 1.3 times less risky than Global Hard. It trades about 0.01 of its potential returns per unit of risk. Global Hard Assets is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 3,069 in Global Hard Assets on December 4, 2024 and sell it today you would earn a total of 26.00 from holding Global Hard Assets or generate 0.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.59% |
| Values | Daily Returns |
Commonwealth Global Fund vs. Global Hard Assets
Performance |
| Timeline |
| Commonwealth Global |
| Global Hard Assets |
Commonwealth Global and Global Hard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Global and Global Hard
The main advantage of trading using opposite Commonwealth Global and Global Hard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Global position performs unexpectedly, Global Hard 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 Hard will offset losses from the drop in Global Hard's long position.The idea behind Commonwealth Global Fund and Global Hard Assets 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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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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