Correlation Between International Investors and Global Hard
Can any of the company-specific risk be diversified away by investing in both International Investors 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 International Investors and Global Hard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Investors Gold and Global Hard Assets, you can compare the effects of market volatilities on International Investors 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 International Investors with a short position of Global Hard. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Investors and Global Hard.
Diversification Opportunities for International Investors and Global Hard
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between International and Global is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding International Investors Gold 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 International Investors 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 International Investors Gold 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 International Investors i.e., International Investors and Global Hard go up and down completely randomly.
Pair Corralation between International Investors and Global Hard
Assuming the 90 days horizon International Investors Gold is expected to under-perform the Global Hard. In addition to that, International Investors is 2.42 times more volatile than Global Hard Assets. It trades about -0.15 of its total potential returns per unit of risk. Global Hard Assets is currently generating about 0.12 per unit of volatility. If you would invest 4,100 in Global Hard Assets on September 1, 2024 and sell it today you would earn a total of 84.00 from holding Global Hard Assets or generate 2.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Investors Gold vs. Global Hard Assets
Performance |
| Timeline |
| International Investors |
| Global Hard Assets |
International Investors and Global Hard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Investors and Global Hard
The main advantage of trading using opposite International Investors and Global Hard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Investors 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 International Investors Gold 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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