Correlation Between Moderate Strategy and Global Resources

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

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

Diversification Opportunities for Moderate Strategy and Global Resources

0.93

Correlation Coefficient

Moderate Strategy  Global Resources

Almost no diversification

The 3 months correlation between Moderate and Global is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Moderate Strategy Fund and Global Resources Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Resources and Moderate 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 Moderate Strategy Fund 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 Moderate Strategy i.e., Moderate Strategy and Global Resources go up and down completely randomly.

Pair Corralation between Moderate Strategy and Global Resources

Assuming the 90 days horizon Moderate Strategy is expected to generate 2.68 times less return on investment than Global Resources. But when comparing it to its historical volatility, Moderate Strategy Fund is 2.51 times less risky than Global Resources. It trades about 0.27 of its potential returns per unit of risk. Global Resources Fund is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  379.00  in Global Resources Fund on April 26, 2025 and sell it today you would earn a total of  62.00  from holding Global Resources Fund or generate 16.36% return on investment over 90 days.

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

Moderate Strategy Fund  vs.  Global Resources Fund

Moderate Strategy

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Moderate Strategy Fund are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Moderate Strategy 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

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global Resources Fund are ranked lower than 22 (%) 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 Moderate Strategy and Global Resources

The main advantage of trading using opposite Moderate Strategy and Global Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Moderate Strategy 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 Moderate Strategy Fund 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.