Correlation Between Parametric Modity and Global Hard
Can any of the company-specific risk be diversified away by investing in both Parametric Modity 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 Parametric Modity and Global Hard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Parametric Modity Strategy and Global Hard Assets, you can compare the effects of market volatilities on Parametric Modity 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 Parametric Modity with a short position of Global Hard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Parametric Modity and Global Hard.
Diversification Opportunities for Parametric Modity and Global Hard
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Parametric and GLOBAL is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Parametric Modity Strategy 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 Parametric Modity 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 Parametric Modity Strategy 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 Parametric Modity i.e., Parametric Modity and Global Hard go up and down completely randomly.
Pair Corralation between Parametric Modity and Global Hard
Assuming the 90 days horizon Parametric Modity is expected to generate 2.11 times less return on investment than Global Hard. But when comparing it to its historical volatility, Parametric Modity Strategy is 1.07 times less risky than Global Hard. It trades about 0.06 of its potential returns per unit of risk. Global Hard Assets is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 4,008 in Global Hard Assets on September 1, 2024 and sell it today you would earn a total of 81.00 from holding Global Hard Assets or generate 2.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Parametric Modity Strategy vs. Global Hard Assets
Performance |
| Timeline |
| Parametric Modity |
| Global Hard Assets |
Parametric Modity and Global Hard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Parametric Modity and Global Hard
The main advantage of trading using opposite Parametric Modity and Global Hard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Parametric Modity 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.| Parametric Modity vs. Western Asset Inflation | Parametric Modity vs. Aqr Managed Futures | Parametric Modity vs. The Hartford Inflation | Parametric Modity vs. Ab Bond Inflation |
| Global Hard vs. Rbc Funds Trust | Global Hard vs. Growth Opportunities Fund | Global Hard vs. Semiconductor Ultrasector Profund | Global Hard vs. Vanguard Small Cap Growth |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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