Correlation Between International Value and International Growth
Can any of the company-specific risk be diversified away by investing in both International Value and International Growth 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 International Value and International Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Value Fund and International Growth Fund, you can compare the effects of market volatilities on International Value and International Growth 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 International Value with a short position of International Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Value and International Growth.
Diversification Opportunities for International Value and International Growth
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between International and International is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding International Value Fund and International Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Growth and International Value 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 International Value Fund are associated (or correlated) with International Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Growth has no effect on the direction of International Value i.e., International Value and International Growth go up and down completely randomly.
Pair Corralation between International Value and International Growth
Assuming the 90 days horizon International Value Fund is expected to generate 0.99 times more return on investment than International Growth. However, International Value Fund is 1.01 times less risky than International Growth. It trades about -0.14 of its potential returns per unit of risk. International Growth Fund is currently generating about -0.15 per unit of risk. If you would invest 896.00 in International Value Fund on August 26, 2024 and sell it today you would lose (21.00) from holding International Value Fund or give up 2.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Value Fund vs. International Growth Fund
Performance |
| Timeline |
| International Value |
| International Growth |
International Value and International Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Value and International Growth
The main advantage of trading using opposite International Value and International Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Value position performs unexpectedly, International Growth 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 International Growth will offset losses from the drop in International Growth's long position.| International Value vs. Focused International Growth | International Value vs. Small Cap Growth | International Value vs. Disciplined Growth Fund | International Value vs. Large Pany Value |
| International Growth vs. Value Fund Investor | International Growth vs. Ultra Fund Investor | International Growth vs. Growth Fund Investor | International Growth vs. Income Growth Fund |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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