Correlation Between Locorr Longshort and Capital World
Can any of the company-specific risk be diversified away by investing in both Locorr Longshort and Capital World 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 Locorr Longshort and Capital World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Locorr Longshort Modities and Capital World Bond, you can compare the effects of market volatilities on Locorr Longshort and Capital World 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 Locorr Longshort with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Locorr Longshort and Capital World.
Diversification Opportunities for Locorr Longshort and Capital World
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Locorr and Capital is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Locorr Longshort Modities and Capital World Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Bond and Locorr Longshort 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 Locorr Longshort Modities are associated (or correlated) with Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Bond has no effect on the direction of Locorr Longshort i.e., Locorr Longshort and Capital World go up and down completely randomly.
Pair Corralation between Locorr Longshort and Capital World
Assuming the 90 days horizon Locorr Longshort Modities is expected to under-perform the Capital World. In addition to that, Locorr Longshort is 1.42 times more volatile than Capital World Bond. It trades about -0.2 of its total potential returns per unit of risk. Capital World Bond is currently generating about 0.06 per unit of volatility. If you would invest 1,595 in Capital World Bond on September 12, 2024 and sell it today you would earn a total of 6.00 from holding Capital World Bond or generate 0.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Locorr Longshort Modities vs. Capital World Bond
Performance |
| Timeline |
| Locorr Longshort Modities |
| Capital World Bond |
Locorr Longshort and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Locorr Longshort and Capital World
The main advantage of trading using opposite Locorr Longshort and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Locorr Longshort position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World's long position.| Locorr Longshort vs. Us Vector Equity | Locorr Longshort vs. Ab Select Equity | Locorr Longshort vs. Touchstone International Equity | Locorr Longshort vs. Ms Global Fixed |
| Capital World vs. Templeton Global Bond | Capital World vs. Templeton Global Bond | Capital World vs. Capital World Bond | Capital World vs. Capital World Bond |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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