Correlation Between Balanced Strategy and Global Real

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

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

Diversification Opportunities for Balanced Strategy and Global Real

-0.02

Correlation Coefficient

Balanced Strategy  Global Real

Good diversification

The 3 months correlation between Balanced and Global is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Strategy Fund and Global Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Real Estate and Balanced Strategy 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 Balanced Strategy Fund are associated (or correlated) with Global Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Real Estate has no effect on the direction of Balanced Strategy i.e., Balanced Strategy and Global Real go up and down completely randomly.

Pair Corralation between Balanced Strategy and Global Real

Assuming the 90 days horizon Balanced Strategy Fund is expected to generate 0.6 times more return on investment than Global Real. However, Balanced Strategy Fund is 1.67 times less risky than Global Real. It trades about 0.04 of its potential returns per unit of risk. Global Real Estate is currently generating about -0.15 per unit of risk. If you would invest  1,033  in Balanced Strategy Fund on September 17, 2024 and sell it today you would earn a total of  10.00  from holding Balanced Strategy Fund or generate 0.97% return on investment over 90 days.

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

Balanced Strategy Fund  vs.  Global Real Estate

Balanced Strategy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Balanced Strategy Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Balanced Strategy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Balanced Strategy and Global Real

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

The idea behind Balanced Strategy Fund and Global Real Estate 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.