Correlation Between Global Franchise and International Advantage
Can any of the company-specific risk be diversified away by investing in both Global Franchise and International Advantage 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 Franchise and International Advantage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Franchise Portfolio and International Advantage Portfolio, you can compare the effects of market volatilities on Global Franchise and International Advantage 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 Franchise with a short position of International Advantage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Franchise and International Advantage.
Diversification Opportunities for Global Franchise and International Advantage
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Global and International is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Global Franchise Portfolio and International Advantage Portfo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Advantage and Global Franchise 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 Franchise Portfolio are associated (or correlated) with International Advantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Advantage has no effect on the direction of Global Franchise i.e., Global Franchise and International Advantage go up and down completely randomly.
Pair Corralation between Global Franchise and International Advantage
Assuming the 90 days horizon Global Franchise Portfolio is expected to generate 0.61 times more return on investment than International Advantage. However, Global Franchise Portfolio is 1.64 times less risky than International Advantage. It trades about 0.07 of its potential returns per unit of risk. International Advantage Portfolio is currently generating about 0.04 per unit of risk. If you would invest 3,509 in Global Franchise Portfolio on August 28, 2024 and sell it today you would earn a total of 318.00 from holding Global Franchise Portfolio or generate 9.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Franchise Portfolio vs. International Advantage Portfo
Performance |
| Timeline |
| Global Franchise Por |
| International Advantage |
Global Franchise and International Advantage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Franchise and International Advantage
The main advantage of trading using opposite Global Franchise and International Advantage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Franchise position performs unexpectedly, International Advantage 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 Advantage will offset losses from the drop in International Advantage's long position.| Global Franchise vs. Emerging Markets Equity | Global Franchise vs. Global Fixed Income | Global Franchise vs. Global Fixed Income | Global Franchise vs. Global Fixed Income |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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