Correlation Between Value Fund and Global Managed
Can any of the company-specific risk be diversified away by investing in both Value Fund and Global Managed 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 Value Fund and Global Managed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Value Fund Value and Global Managed Volatility, you can compare the effects of market volatilities on Value Fund and Global Managed 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 Value Fund with a short position of Global Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Value Fund and Global Managed.
Diversification Opportunities for Value Fund and Global Managed
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Value and Global is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Value Fund Value and Global Managed Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Managed Volatility and Value Fund 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 Value Fund Value are associated (or correlated) with Global Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Managed Volatility has no effect on the direction of Value Fund i.e., Value Fund and Global Managed go up and down completely randomly.
Pair Corralation between Value Fund and Global Managed
Assuming the 90 days horizon Value Fund is expected to generate 1.56 times less return on investment than Global Managed. In addition to that, Value Fund is 1.32 times more volatile than Global Managed Volatility. It trades about 0.04 of its total potential returns per unit of risk. Global Managed Volatility is currently generating about 0.09 per unit of volatility. If you would invest 852.00 in Global Managed Volatility on November 27, 2024 and sell it today you would earn a total of 287.00 from holding Global Managed Volatility or generate 33.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Value Fund Value vs. Global Managed Volatility
Performance |
| Timeline |
| Value Fund Value |
| Global Managed Volatility |
Value Fund and Global Managed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Value Fund and Global Managed
The main advantage of trading using opposite Value Fund and Global Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value Fund position performs unexpectedly, Global Managed 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 Managed will offset losses from the drop in Global Managed's long position.| Value Fund vs. The Hartford World | Value Fund vs. Multisector Bond Sma | Value Fund vs. Gmo High Yield | Value Fund vs. Versatile Bond Portfolio |
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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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