Correlation Between Focused International and Global Small
Can any of the company-specific risk be diversified away by investing in both Focused International and Global Small 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 Focused International and Global Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Focused International Growth and Global Small Cap, you can compare the effects of market volatilities on Focused International and Global Small 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 Focused International with a short position of Global Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Focused International and Global Small.
Diversification Opportunities for Focused International and Global Small
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Focused and Global is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Focused International Growth and Global Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Small Cap and Focused International 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 Focused International Growth are associated (or correlated) with Global Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Small Cap has no effect on the direction of Focused International i.e., Focused International and Global Small go up and down completely randomly.
Pair Corralation between Focused International and Global Small
Assuming the 90 days horizon Focused International is expected to generate 1.94 times less return on investment than Global Small. But when comparing it to its historical volatility, Focused International Growth is 1.15 times less risky than Global Small. It trades about 0.03 of its potential returns per unit of risk. Global Small Cap is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,572 in Global Small Cap on August 26, 2024 and sell it today you would earn a total of 415.00 from holding Global Small Cap or generate 26.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Focused International Growth vs. Global Small Cap
Performance |
| Timeline |
| Focused International |
| Global Small Cap |
Focused International and Global Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Focused International and Global Small
The main advantage of trading using opposite Focused International and Global Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Focused International position performs unexpectedly, Global Small 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 Small will offset losses from the drop in Global Small's long position.| Focused International vs. Jennison Natural Resources | Focused International vs. Short Oil Gas | Focused International vs. Franklin Natural Resources | Focused International vs. Icon Natural Resources |
| Global Small vs. Quantitative U S | Global Small vs. Rational Strategic Allocation | Global Small vs. Aqr Large Cap | Global Small vs. Legg Mason Bw |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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