Correlation Between Commonwealth Global and Free Market

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

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

Diversification Opportunities for Commonwealth Global and Free Market

0.05

Correlation Coefficient

Commonwealth Global  Free Market

Significant diversification

The 3 months correlation between Commonwealth and Free is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Global Fund and Free Market International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Free Market International and Commonwealth Global 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 Commonwealth Global Fund are associated (or correlated) with Free Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Free Market International has no effect on the direction of Commonwealth Global i.e., Commonwealth Global and Free Market go up and down completely randomly.

Pair Corralation between Commonwealth Global and Free Market

Assuming the 90 days horizon Commonwealth Global Fund is expected to generate 0.92 times more return on investment than Free Market. However, Commonwealth Global Fund is 1.09 times less risky than Free Market. It trades about 0.06 of its potential returns per unit of risk. Free Market International is currently generating about -0.04 per unit of risk. If you would invest  2,111  in Commonwealth Global Fund on September 17, 2024 and sell it today you would earn a total of  53.00  from holding Commonwealth Global Fund or generate 2.51% return on investment over 90 days.

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

Commonwealth Global Fund  vs.  Free Market International

Commonwealth Global

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Commonwealth Global Fund are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Commonwealth Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Free Market International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Commonwealth Global and Free Market

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

The idea behind Commonwealth Global Fund and Free Market International 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.