Correlation Between Global Growth and Select Fund

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Can any of the company-specific risk be diversified away by investing in both Global Growth and Select Fund 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 Growth and Select Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Growth Fund and Select Fund A, you can compare the effects of market volatilities on Global Growth and Select Fund 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 Growth with a short position of Select Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Growth and Select Fund.

Diversification Opportunities for Global Growth and Select Fund

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between Global and Select is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Global Growth Fund and Select Fund A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Fund A and Global Growth 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 Growth Fund are associated (or correlated) with Select Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Fund A has no effect on the direction of Global Growth i.e., Global Growth and Select Fund go up and down completely randomly.

Pair Corralation between Global Growth and Select Fund

Assuming the 90 days horizon Global Growth Fund is expected to under-perform the Select Fund. But the mutual fund apears to be less risky and, when comparing its historical volatility, Global Growth Fund is 1.29 times less risky than Select Fund. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Select Fund A is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  11,499  in Select Fund A on August 30, 2024 and sell it today you would earn a total of  383.00  from holding Select Fund A or generate 3.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Global Growth Fund  vs.  Select Fund A

 Performance 
       Timeline  
Global Growth 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Global Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Global Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Select Fund A 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Select Fund A are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Select Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Global Growth and Select Fund Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Global Growth and Select Fund

The main advantage of trading using opposite Global Growth and Select Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Growth position performs unexpectedly, Select Fund 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 Select Fund will offset losses from the drop in Select Fund's long position.
The idea behind Global Growth Fund and Select Fund A pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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