Correlation Between Broad Cap and Global Strategy
Can any of the company-specific risk be diversified away by investing in both Broad Cap and Global Strategy 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 Broad Cap and Global Strategy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Broad Cap Value and Global Strategy Fund, you can compare the effects of market volatilities on Broad Cap and Global Strategy 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 Broad Cap with a short position of Global Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Broad Cap and Global Strategy.
Diversification Opportunities for Broad Cap and Global Strategy
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Broad and Global is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Broad Cap Value and Global Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Strategy and Broad Cap 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 Broad Cap Value are associated (or correlated) with Global Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Strategy has no effect on the direction of Broad Cap i.e., Broad Cap and Global Strategy go up and down completely randomly.
Pair Corralation between Broad Cap and Global Strategy
Assuming the 90 days horizon Broad Cap Value is expected to under-perform the Global Strategy. In addition to that, Broad Cap is 1.44 times more volatile than Global Strategy Fund. It trades about -0.01 of its total potential returns per unit of risk. Global Strategy Fund is currently generating about 0.09 per unit of volatility. If you would invest 1,042 in Global Strategy Fund on November 29, 2024 and sell it today you would earn a total of 8.00 from holding Global Strategy Fund or generate 0.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Broad Cap Value vs. Global Strategy Fund
Performance |
| Timeline |
| Broad Cap Value |
| Global Strategy |
Broad Cap and Global Strategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Broad Cap and Global Strategy
The main advantage of trading using opposite Broad Cap and Global Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Broad Cap position performs unexpectedly, Global Strategy 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 Strategy will offset losses from the drop in Global Strategy's long position.| Broad Cap vs. Access Capital Munity | Broad Cap vs. Pace Municipal Fixed | Broad Cap vs. Federated Government Income | Broad Cap vs. Franklin Adjustable Government |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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