Correlation Between Commonwealth Global and Vy(r) Baron
Can any of the company-specific risk be diversified away by investing in both Commonwealth Global and Vy(r) Baron 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 Vy(r) Baron 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 Vy Baron Growth, you can compare the effects of market volatilities on Commonwealth Global and Vy(r) Baron 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 Vy(r) Baron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Global and Vy(r) Baron.
Diversification Opportunities for Commonwealth Global and Vy(r) Baron
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Commonwealth and Vy(r) is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Global Fund and Vy Baron Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vy Baron Growth 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 Vy(r) Baron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vy Baron Growth has no effect on the direction of Commonwealth Global i.e., Commonwealth Global and Vy(r) Baron go up and down completely randomly.
Pair Corralation between Commonwealth Global and Vy(r) Baron
Assuming the 90 days horizon Commonwealth Global Fund is expected to under-perform the Vy(r) Baron. In addition to that, Commonwealth Global is 1.01 times more volatile than Vy Baron Growth. It trades about -0.44 of its total potential returns per unit of risk. Vy Baron Growth is currently generating about -0.3 per unit of volatility. If you would invest 2,104 in Vy Baron Growth on October 10, 2024 and sell it today you would lose (118.00) from holding Vy Baron Growth or give up 5.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Global Fund vs. Vy Baron Growth
Performance |
| Timeline |
| Commonwealth Global |
| Vy Baron Growth |
Commonwealth Global and Vy(r) Baron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Global and Vy(r) Baron
The main advantage of trading using opposite Commonwealth Global and Vy(r) Baron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Global position performs unexpectedly, Vy(r) Baron 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 Vy(r) Baron will offset losses from the drop in Vy(r) Baron's long position.The idea behind Commonwealth Global Fund and Vy Baron Growth 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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