Correlation Between Global Social and Foreign Value
Can any of the company-specific risk be diversified away by investing in both Global Social and Foreign Value 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 Social and Foreign Value into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Social Awareness and Foreign Value Fund, you can compare the effects of market volatilities on Global Social and Foreign Value 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 Social with a short position of Foreign Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Social and Foreign Value.
Diversification Opportunities for Global Social and Foreign Value
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Global and Foreign is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Global Social Awareness and Foreign Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foreign Value and Global Social 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 Social Awareness are associated (or correlated) with Foreign Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foreign Value has no effect on the direction of Global Social i.e., Global Social and Foreign Value go up and down completely randomly.
Pair Corralation between Global Social and Foreign Value
Assuming the 90 days horizon Global Social Awareness is expected to under-perform the Foreign Value. But the mutual fund apears to be less risky and, when comparing its historical volatility, Global Social Awareness is 1.14 times less risky than Foreign Value. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Foreign Value Fund is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 1,100 in Foreign Value Fund on December 25, 2024 and sell it today you would lose (19.00) from holding Foreign Value Fund or give up 1.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Social Awareness vs. Foreign Value Fund
Performance |
| Timeline |
| Global Social Awareness |
| Foreign Value |
Global Social and Foreign Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Social and Foreign Value
The main advantage of trading using opposite Global Social and Foreign Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Social position performs unexpectedly, Foreign Value 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 Foreign Value will offset losses from the drop in Foreign Value's long position.| Global Social vs. Diversified Bond Fund | Global Social vs. Fidelity Advisor Diversified | Global Social vs. Diversified Bond Fund | Global Social vs. Mfs Diversified Income |
| Foreign Value vs. Flexible Bond Portfolio | Foreign Value vs. Intermediate Bond Fund | Foreign Value vs. Bbh Intermediate Municipal | Foreign Value vs. Ambrus Core Bond |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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