Correlation Between Income Fund and SP GLOBAL

Can any of the company-specific risk be diversified away by investing in both Income Fund and SP GLOBAL 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 Income Fund and SP GLOBAL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Income Fund Of and SP GLOBAL 1200, you can compare the effects of market volatilities on Income Fund and SP GLOBAL 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 Income Fund with a short position of SP GLOBAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Fund and SP GLOBAL.

Diversification Opportunities for Income Fund and SP GLOBAL

0.89

Correlation Coefficient

Income Fund  SP GLOBAL

Very poor diversification

The 3 months correlation between Income and SGLY is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Income Fund Of and SP GLOBAL 1200 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP GLOBAL 1200 and Income 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 Income Fund Of are associated (or correlated) with SP GLOBAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP GLOBAL 1200 has no effect on the direction of Income Fund i.e., Income Fund and SP GLOBAL go up and down completely randomly.

Pair Corralation between Income Fund and SP GLOBAL

Assuming the 90 days horizon Income Fund Of is expected to under-perform the SP GLOBAL. But the mutual fund apears to be less risky and, when comparing its historical volatility, Income Fund Of is 1.11 times less risky than SP GLOBAL. The mutual fund trades about -0.06 of its potential returns per unit of risk. The SP GLOBAL 1200 is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  416,297  in SP GLOBAL 1200 on September 12, 2024 and sell it today you would earn a total of  3,785  from holding SP GLOBAL 1200 or generate 0.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

Income Fund Of  vs.  SP GLOBAL 1200

Pair Trading with Income Fund and SP GLOBAL

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

The idea behind Income Fund Of and SP GLOBAL 1200 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.