Correlation Between Global Real and Avantis Large

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

By analyzing existing cross correlation between Global Real Estate and Avantis Large Cap, you can compare the effects of market volatilities on Global Real and Avantis Large 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 Real with a short position of Avantis Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Real and Avantis Large.

Diversification Opportunities for Global Real and Avantis Large

0.14

Correlation Coefficient

Global Real  Avantis Large

Average diversification

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

Pair Corralation between Global Real and Avantis Large

Assuming the 90 days horizon Global Real Estate is expected to under-perform the Avantis Large. In addition to that, Global Real is 1.05 times more volatile than Avantis Large Cap. It trades about -0.16 of its total potential returns per unit of risk. Avantis Large Cap is currently generating about 0.02 per unit of volatility. If you would invest  1,406  in Avantis Large Cap on September 25, 2024 and sell it today you would earn a total of  16.00  from holding Avantis Large Cap or generate 1.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Global Real Estate  vs.  Avantis Large Cap

Global Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Real Estate has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Avantis Large Cap

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis Large Cap are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Avantis Large 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 Real and Avantis Large

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

The idea behind Global Real Estate and Avantis Large Cap 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.