Correlation Between Global Opportunity and Sands Capital

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

By analyzing existing cross correlation between Global Opportunity Portfolio and Sands Capital Global, you can compare the effects of market volatilities on Global Opportunity and Sands Capital 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 Opportunity with a short position of Sands Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Opportunity and Sands Capital.

Diversification Opportunities for Global Opportunity and Sands Capital

0.92

Correlation Coefficient

Global Opportunity  Sands Capital

Almost no diversification

The 3 months correlation between Global and Sands is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Global Opportunity Portfolio and Sands Capital Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sands Capital Global and Global Opportunity 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 Opportunity Portfolio are associated (or correlated) with Sands Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sands Capital Global has no effect on the direction of Global Opportunity i.e., Global Opportunity and Sands Capital go up and down completely randomly.

Pair Corralation between Global Opportunity and Sands Capital

Assuming the 90 days horizon Global Opportunity Portfolio is expected to generate 0.93 times more return on investment than Sands Capital. However, Global Opportunity Portfolio is 1.08 times less risky than Sands Capital. It trades about 0.28 of its potential returns per unit of risk. Sands Capital Global is currently generating about 0.25 per unit of risk. If you would invest  3,389  in Global Opportunity Portfolio on September 5, 2024 and sell it today you would earn a total of  564.00  from holding Global Opportunity Portfolio or generate 16.64% return on investment over 90 days.

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

Global Opportunity Portfolio  vs.  Sands Capital Global

Global Opportunity

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global Opportunity Portfolio are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Global Opportunity showed solid returns over the last few months and may actually be approaching a breakup point.

Sands Capital Global

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sands Capital Global are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Sands Capital showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global Opportunity and Sands Capital

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

The idea behind Global Opportunity Portfolio and Sands Capital Global 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .