Correlation Between Commonwealth Global and 1290 Retirement
Can any of the company-specific risk be diversified away by investing in both Commonwealth Global and 1290 Retirement 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 1290 Retirement 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 1290 Retirement 2035, you can compare the effects of market volatilities on Commonwealth Global and 1290 Retirement 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 1290 Retirement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Global and 1290 Retirement.
Diversification Opportunities for Commonwealth Global and 1290 Retirement
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Commonwealth and 1290 is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Global Fund and 1290 Retirement 2035 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1290 Retirement 2035 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 1290 Retirement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1290 Retirement 2035 has no effect on the direction of Commonwealth Global i.e., Commonwealth Global and 1290 Retirement go up and down completely randomly.
Pair Corralation between Commonwealth Global and 1290 Retirement
Assuming the 90 days horizon Commonwealth Global Fund is expected to generate 0.92 times more return on investment than 1290 Retirement. However, Commonwealth Global Fund is 1.09 times less risky than 1290 Retirement. It trades about 0.18 of its potential returns per unit of risk. 1290 Retirement 2035 is currently generating about -0.11 per unit of risk. If you would invest 2,125 in Commonwealth Global Fund on September 15, 2024 and sell it today you would earn a total of 45.00 from holding Commonwealth Global Fund or generate 2.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Commonwealth Global Fund vs. 1290 Retirement 2035
Performance |
| Timeline |
| Commonwealth Global |
| 1290 Retirement 2035 |
Commonwealth Global and 1290 Retirement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Global and 1290 Retirement
The main advantage of trading using opposite Commonwealth Global and 1290 Retirement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Global position performs unexpectedly, 1290 Retirement 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 1290 Retirement will offset losses from the drop in 1290 Retirement's long position.The idea behind Commonwealth Global Fund and 1290 Retirement 2035 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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