Correlation Between Commonwealth Global and Perkins Small
Can any of the company-specific risk be diversified away by investing in both Commonwealth Global and Perkins Small 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 Perkins Small 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 Perkins Small Cap, you can compare the effects of market volatilities on Commonwealth Global and Perkins Small 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 Perkins Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Global and Perkins Small.
Diversification Opportunities for Commonwealth Global and Perkins Small
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Commonwealth and Perkins is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Global Fund and Perkins Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perkins Small Cap 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 Perkins Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perkins Small Cap has no effect on the direction of Commonwealth Global i.e., Commonwealth Global and Perkins Small go up and down completely randomly.
Pair Corralation between Commonwealth Global and Perkins Small
Assuming the 90 days horizon Commonwealth Global Fund is expected to generate 0.25 times more return on investment than Perkins Small. However, Commonwealth Global Fund is 4.08 times less risky than Perkins Small. It trades about 0.12 of its potential returns per unit of risk. Perkins Small Cap is currently generating about -0.2 per unit of risk. If you would invest 2,141 in Commonwealth Global Fund on September 13, 2024 and sell it today you would earn a total of 31.00 from holding Commonwealth Global Fund or generate 1.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Global Fund vs. Perkins Small Cap
Performance |
| Timeline |
| Commonwealth Global |
| Perkins Small Cap |
Commonwealth Global and Perkins Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Global and Perkins Small
The main advantage of trading using opposite Commonwealth Global and Perkins Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Global position performs unexpectedly, Perkins Small 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 Perkins Small will offset losses from the drop in Perkins Small's long position.The idea behind Commonwealth Global Fund and Perkins Small Cap 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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