Correlation Between Global Real and Equity Growth
Can any of the company-specific risk be diversified away by investing in both Global Real and Equity Growth 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 Real and Equity Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Real Estate and Equity Growth Strategy, you can compare the effects of market volatilities on Global Real and Equity Growth 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 Real with a short position of Equity Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Real and Equity Growth.
Diversification Opportunities for Global Real and Equity Growth
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Global and Equity is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Global Real Estate and Equity Growth Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Growth Strategy and Global Real 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 Real Estate are associated (or correlated) with Equity Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Growth Strategy has no effect on the direction of Global Real i.e., Global Real and Equity Growth go up and down completely randomly.
Pair Corralation between Global Real and Equity Growth
Assuming the 90 days horizon Global Real is expected to generate 1.61 times less return on investment than Equity Growth. In addition to that, Global Real is 1.45 times more volatile than Equity Growth Strategy. It trades about 0.14 of its total potential returns per unit of risk. Equity Growth Strategy is currently generating about 0.33 per unit of volatility. If you would invest 1,554 in Equity Growth Strategy on September 1, 2024 and sell it today you would earn a total of 61.00 from holding Equity Growth Strategy or generate 3.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Real Estate vs. Equity Growth Strategy
Performance |
| Timeline |
| Global Real Estate |
| Equity Growth Strategy |
Global Real and Equity Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Real and Equity Growth
The main advantage of trading using opposite Global Real and Equity Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Real position performs unexpectedly, Equity Growth 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 Equity Growth will offset losses from the drop in Equity Growth's long position.| Global Real vs. Massmutual Premier Diversified | Global Real vs. Aqr Diversified Arbitrage | Global Real vs. Calvert Conservative Allocation | Global Real vs. Huber Capital Diversified |
| Equity Growth vs. International Developed Markets | Equity Growth vs. Global Real Estate | Equity Growth vs. Global Real Estate | Equity Growth vs. Global Real Estate |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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