Correlation Between Global Resources and Science Technology

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

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

Diversification Opportunities for Global Resources and Science Technology

0.92

Correlation Coefficient

Global Resources  Science Technology

Almost no diversification

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

Pair Corralation between Global Resources and Science Technology

Assuming the 90 days horizon Global Resources is expected to generate 8.6 times less return on investment than Science Technology. But when comparing it to its historical volatility, Global Resources Fund is 1.05 times less risky than Science Technology. It trades about 0.02 of its potential returns per unit of risk. Science Technology Fund is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3,613  in Science Technology Fund on May 8, 2025 and sell it today you would earn a total of  96.00  from holding Science Technology Fund or generate 2.66% return on investment over 90 days.

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

Global Resources Fund  vs.  Science Technology Fund

Global Resources

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global Resources Fund are ranked lower than 20 (%) 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.

Science Technology

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Science Technology Fund are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Science Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global Resources and Science Technology

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

The idea behind Global Resources Fund and Science Technology 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.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.