Correlation Between Balanced Strategy and Global Infrastructure
Can any of the company-specific risk be diversified away by investing in both Balanced Strategy and Global Infrastructure 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 Balanced Strategy and Global Infrastructure into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balanced Strategy Fund and Global Infrastructure Fund, you can compare the effects of market volatilities on Balanced Strategy and Global Infrastructure 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 Balanced Strategy with a short position of Global Infrastructure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Strategy and Global Infrastructure.
Diversification Opportunities for Balanced Strategy and Global Infrastructure
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Balanced and Global is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Strategy Fund and Global Infrastructure Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Infrastructure and Balanced Strategy 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 Balanced Strategy Fund are associated (or correlated) with Global Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Infrastructure has no effect on the direction of Balanced Strategy i.e., Balanced Strategy and Global Infrastructure go up and down completely randomly.
Pair Corralation between Balanced Strategy and Global Infrastructure
Assuming the 90 days horizon Balanced Strategy Fund is expected to generate 0.73 times more return on investment than Global Infrastructure. However, Balanced Strategy Fund is 1.36 times less risky than Global Infrastructure. It trades about 0.08 of its potential returns per unit of risk. Global Infrastructure Fund is currently generating about 0.05 per unit of risk. If you would invest 919.00 in Balanced Strategy Fund on September 3, 2024 and sell it today you would earn a total of 212.00 from holding Balanced Strategy Fund or generate 23.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Balanced Strategy Fund vs. Global Infrastructure Fund
Performance |
| Timeline |
| Balanced Strategy |
| Global Infrastructure |
Balanced Strategy and Global Infrastructure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balanced Strategy and Global Infrastructure
The main advantage of trading using opposite Balanced Strategy and Global Infrastructure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balanced Strategy position performs unexpectedly, Global Infrastructure 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 Infrastructure will offset losses from the drop in Global Infrastructure's long position.| Balanced Strategy vs. Morningstar Global Income | Balanced Strategy vs. Mirova Global Green | Balanced Strategy vs. Artisan Global Unconstrained | Balanced Strategy vs. Legg Mason Global |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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