Correlation Between Global Franchise and International Advantage

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

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

Diversification Opportunities for Global Franchise and International Advantage

0.27

Correlation Coefficient

Global Franchise  International Advantage

Modest diversification

The 3 months correlation between Global and International is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Global Franchise Portfolio and International Advantage Portfo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Advantage and Global Franchise 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 Franchise Portfolio are associated (or correlated) with International Advantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Advantage has no effect on the direction of Global Franchise i.e., Global Franchise and International Advantage go up and down completely randomly.

Pair Corralation between Global Franchise and International Advantage

Assuming the 90 days horizon Global Franchise Portfolio is expected to under-perform the International Advantage. In addition to that, Global Franchise is 4.17 times more volatile than International Advantage Portfolio. It trades about -0.18 of its total potential returns per unit of risk. International Advantage Portfolio is currently generating about 0.36 per unit of volatility. If you would invest  2,375  in International Advantage Portfolio on September 18, 2024 and sell it today you would earn a total of  103.00  from holding International Advantage Portfolio or generate 4.34% return on investment over 90 days.

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

Global Franchise Portfolio  vs.  International Advantage Portfo

Global Franchise Por

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Franchise Portfolio 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.

International Advantage

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in International Advantage Portfolio are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, International Advantage 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 Franchise and International Advantage

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

The idea behind Global Franchise Portfolio and International Advantage Portfolio 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.