Can any of the company-specific risk be diversified away by investing in both Globalfoundries and 90331HPL1 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 Globalfoundries and 90331HPL1 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Globalfoundries and US BANK NATIONAL, you can compare the effects of market volatilities on Globalfoundries and 90331HPL1 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 Globalfoundries with a short position of 90331HPL1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Globalfoundries and 90331HPL1.
Diversification Opportunities for Globalfoundries and 90331HPL1
The 3 months correlation between Globalfoundries and 90331HPL1 is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Globalfoundries and US BANK NATIONAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US BANK NATIONAL and Globalfoundries 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 Globalfoundries are associated (or correlated) with 90331HPL1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US BANK NATIONAL has no effect on the direction of Globalfoundries i.e., Globalfoundries and 90331HPL1 go up and down completely randomly.
Pair Corralation between Globalfoundries and 90331HPL1
Considering the 90-day investment horizon Globalfoundries is expected to generate 4.79 times more return on investment than 90331HPL1. However, Globalfoundries is 4.79 times more volatile than US BANK NATIONAL. It trades about -0.04 of its potential returns per unit of risk. US BANK NATIONAL is currently generating about -0.2 per unit of risk. If you would invest 5,055 in Globalfoundries on March 6, 2024 and sell it today you would lose (262.00) from holding Globalfoundries or give up 5.18% of portfolio value over 90 days.
Over the last 90 days Globalfoundries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Globalfoundries is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.
Over the last 90 days US BANK NATIONAL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 90331HPL1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.