Correlation Between Global Gold and Homestead Intermediate

Can any of the company-specific risk be diversified away by investing in both Global Gold and Homestead Intermediate 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 Gold and Homestead Intermediate into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global Gold Fund and Homestead Intermediate Bond, you can compare the effects of market volatilities on Global Gold and Homestead Intermediate 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 Gold with a short position of Homestead Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Gold and Homestead Intermediate.

Diversification Opportunities for Global Gold and Homestead Intermediate

0.14

Correlation Coefficient

Global Gold  Homestead Intermediate

Average diversification

The 3 months correlation between Global and Homestead is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Global Gold Fund and Homestead Intermediate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homestead Intermediate and Global Gold 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 Gold Fund are associated (or correlated) with Homestead Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homestead Intermediate has no effect on the direction of Global Gold i.e., Global Gold and Homestead Intermediate go up and down completely randomly.

Pair Corralation between Global Gold and Homestead Intermediate

Assuming the 90 days horizon Global Gold Fund is expected to under-perform the Homestead Intermediate. In addition to that, Global Gold is 5.81 times more volatile than Homestead Intermediate Bond. It trades about -0.04 of its total potential returns per unit of risk. Homestead Intermediate Bond is currently generating about -0.16 per unit of volatility. If you would invest  471.00  in Homestead Intermediate Bond on September 16, 2024 and sell it today you would lose (15.00) from holding Homestead Intermediate Bond or give up 3.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Global Gold Fund  vs.  Homestead Intermediate Bond

Global Gold Fund

Risk-Adjusted Performance

0 of 100

Very Weak

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

Homestead Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Homestead Intermediate Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Homestead Intermediate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global Gold and Homestead Intermediate

The main advantage of trading using opposite Global Gold and Homestead Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Gold position performs unexpectedly, Homestead Intermediate 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 Homestead Intermediate will offset losses from the drop in Homestead Intermediate's long position.

The idea behind Global Gold Fund and Homestead Intermediate Bond 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.

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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.