Correlation Between Global Real and Global Franchise
Can any of the company-specific risk be diversified away by investing in both Global Real and Global Franchise 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 Real and Global Franchise into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Real Estate and Global Franchise Portfolio, you can compare the effects of market volatilities on Global Real and Global Franchise 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 Real with a short position of Global Franchise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Real and Global Franchise.
Diversification Opportunities for Global Real and Global Franchise
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Global and Global is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Global Real Estate and Global Franchise Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Franchise Por and Global Real 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 Real Estate are associated (or correlated) with Global Franchise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Franchise Por has no effect on the direction of Global Real i.e., Global Real and Global Franchise go up and down completely randomly.
Pair Corralation between Global Real and Global Franchise
Assuming the 90 days horizon Global Real Estate is expected to generate 1.29 times more return on investment than Global Franchise. However, Global Real is 1.29 times more volatile than Global Franchise Portfolio. It trades about 0.26 of its potential returns per unit of risk. Global Franchise Portfolio is currently generating about 0.16 per unit of risk. If you would invest 435.00 in Global Real Estate on June 23, 2024 and sell it today you would earn a total of 62.00 from holding Global Real Estate or generate 14.25% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Global Real Estate vs. Global Franchise Portfolio
Performance |
Timeline |
Global Real Estate |
Global Franchise Por |
Global Real and Global Franchise Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Global Real and Global Franchise
The main advantage of trading using opposite Global Real and Global Franchise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Real position performs unexpectedly, Global Franchise 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 Franchise will offset losses from the drop in Global Franchise's long position.Global Real vs. Emerging Markets Equity | Global Real vs. Global Fixed Income | Global Real vs. Global Fixed Income | Global Real vs. Global Fixed Income |
Global Franchise vs. Emerging Markets Equity | Global Franchise vs. Global Fixed Income | Global Franchise vs. Global Fixed Income | Global Franchise vs. Global Fixed Income |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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