Correlation Between Global Core and International Opportunity
Can any of the company-specific risk be diversified away by investing in both Global Core and International Opportunity 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 Global Core and International Opportunity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global E Portfolio and International Opportunity Portfolio, you can compare the effects of market volatilities on Global Core and International Opportunity 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 Global Core with a short position of International Opportunity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Core and International Opportunity.
Diversification Opportunities for Global Core and International Opportunity
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Global and International is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Global E Portfolio and International Opportunity Port in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Opportunity and Global Core 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 Global E Portfolio are associated (or correlated) with International Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Opportunity has no effect on the direction of Global Core i.e., Global Core and International Opportunity go up and down completely randomly.
Pair Corralation between Global Core and International Opportunity
Assuming the 90 days horizon Global E Portfolio is expected to generate 0.79 times more return on investment than International Opportunity. However, Global E Portfolio is 1.27 times less risky than International Opportunity. It trades about 0.11 of its potential returns per unit of risk. International Opportunity Portfolio is currently generating about 0.07 per unit of risk. If you would invest 1,472 in Global E Portfolio on August 31, 2024 and sell it today you would earn a total of 566.00 from holding Global E Portfolio or generate 38.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global E Portfolio vs. International Opportunity Port
Performance |
| Timeline |
| Global E Portfolio |
| International Opportunity |
Global Core and International Opportunity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Core and International Opportunity
The main advantage of trading using opposite Global Core and International Opportunity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Core position performs unexpectedly, International Opportunity 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 International Opportunity will offset losses from the drop in International Opportunity's long position.| Global Core vs. Us Vector Equity | Global Core vs. Ms Global Fixed | Global Core vs. Small Cap Equity | Global Core vs. The Gabelli Equity |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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