Correlation Between Global Real and Select International

Can any of the company-specific risk be diversified away by investing in both Global Real and Select International 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 Select International 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 Select International Equity, you can compare the effects of market volatilities on Global Real and Select International 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 Select International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Real and Select International.

Diversification Opportunities for Global Real and Select International

0.48

Correlation Coefficient

Global Real  Select International

Very weak diversification

The 3 months correlation between Global and Select is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Global Real Estate and Select International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select International 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 Select International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select International has no effect on the direction of Global Real i.e., Global Real and Select International go up and down completely randomly.

Pair Corralation between Global Real and Select International

Assuming the 90 days horizon Global Real Estate is expected to under-perform the Select International. In addition to that, Global Real is 1.56 times more volatile than Select International Equity. It trades about -0.08 of its total potential returns per unit of risk. Select International Equity is currently generating about 0.05 per unit of volatility. If you would invest  1,026  in Select International Equity on January 30, 2024 and sell it today you would earn a total of  13.00  from holding Select International Equity or generate 1.27% return on investment over 90 days.

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

Global Real Estate  vs.  Select International Equity

Global Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Select International

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Select International Equity are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Select International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global Real and Select International

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

The idea behind Global Real Estate and Select International Equity 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.