Correlation Between Rational Defensive and Global Resources

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

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

Diversification Opportunities for Rational Defensive and Global Resources

-0.52

Correlation Coefficient

Rational Defensive  Global Resources

Excellent diversification

The 3 months correlation between Rational and Global is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Rational Defensive Growth and Global Resources Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Resources and Rational Defensive 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 Rational Defensive Growth are associated (or correlated) with Global Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Resources has no effect on the direction of Rational Defensive i.e., Rational Defensive and Global Resources go up and down completely randomly.

Pair Corralation between Rational Defensive and Global Resources

Assuming the 90 days horizon Rational Defensive Growth is expected to under-perform the Global Resources. But the mutual fund apears to be less risky and, when comparing its historical volatility, Rational Defensive Growth is 1.96 times less risky than Global Resources. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Global Resources Fund is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  511.00  in Global Resources Fund on September 12, 2025 and sell it today you would earn a total of  110.00  from holding Global Resources Fund or generate 21.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Rational Defensive Growth  vs.  Global Resources Fund

Rational Defensive Growth

Risk-Adjusted Performance

Weakest

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

Global Resources

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Resources Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Global Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rational Defensive and Global Resources

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

The idea behind Rational Defensive Growth and Global Resources Fund 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 Global Correlations module to find global opportunities by holding instruments from different markets.