Correlation Between Focused International and Large Company
Can any of the company-specific risk be diversified away by investing in both Focused International and Large Company 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 Large Company 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 Large Pany Value, you can compare the effects of market volatilities on Focused International and Large Company 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 Large Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Focused International and Large Company.
Diversification Opportunities for Focused International and Large Company
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Focused and Large is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Focused International Growth and Large Pany Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Pany Value 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 Large Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Pany Value has no effect on the direction of Focused International i.e., Focused International and Large Company go up and down completely randomly.
Pair Corralation between Focused International and Large Company
Assuming the 90 days horizon Focused International is expected to generate 1.11 times less return on investment than Large Company. In addition to that, Focused International is 1.39 times more volatile than Large Pany Value. It trades about 0.03 of its total potential returns per unit of risk. Large Pany Value is currently generating about 0.05 per unit of volatility. If you would invest 987.00 in Large Pany Value on August 26, 2024 and sell it today you would earn a total of 148.00 from holding Large Pany Value or generate 14.99% 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. Large Pany Value
Performance |
| Timeline |
| Focused International |
| Large Pany Value |
Focused International and Large Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Focused International and Large Company
The main advantage of trading using opposite Focused International and Large Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Focused International position performs unexpectedly, Large Company 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 Large Company will offset losses from the drop in Large Company'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 |
| Large Company vs. International Growth Fund | Large Company vs. Growth Fund Investor | Large Company vs. Equity Income Fund | Large Company vs. Ultra Fund Investor |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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