Correlation Between Ariel International and Ariel Focus
Can any of the company-specific risk be diversified away by investing in both Ariel International and Ariel Focus 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 Ariel International and Ariel Focus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ariel International Fund and Ariel Focus Fund, you can compare the effects of market volatilities on Ariel International and Ariel Focus 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 Ariel International with a short position of Ariel Focus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ariel International and Ariel Focus.
Diversification Opportunities for Ariel International and Ariel Focus
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ariel and Ariel is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Ariel International Fund and Ariel Focus Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ariel Focus Fund and Ariel 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 Ariel International Fund are associated (or correlated) with Ariel Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ariel Focus Fund has no effect on the direction of Ariel International i.e., Ariel International and Ariel Focus go up and down completely randomly.
Pair Corralation between Ariel International and Ariel Focus
Assuming the 90 days horizon Ariel International Fund is expected to under-perform the Ariel Focus. But the mutual fund apears to be less risky and, when comparing its historical volatility, Ariel International Fund is 1.54 times less risky than Ariel Focus. The mutual fund trades about -0.29 of its potential returns per unit of risk. The Ariel Focus Fund is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 1,697 in Ariel Focus Fund on August 29, 2024 and sell it today you would earn a total of 108.00 from holding Ariel Focus Fund or generate 6.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Ariel International Fund vs. Ariel Focus Fund
Performance |
| Timeline |
| Ariel International |
| Ariel Focus Fund |
Ariel International and Ariel Focus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ariel International and Ariel Focus
The main advantage of trading using opposite Ariel International and Ariel Focus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ariel International position performs unexpectedly, Ariel Focus 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 Ariel Focus will offset losses from the drop in Ariel Focus' long position.| Ariel International vs. Ariel Global Fund | Ariel International vs. Ariel Focus Fund | Ariel International vs. Alger Spectra Fund | Ariel International vs. Ariel International Fund |
| Ariel Focus vs. Ariel Appreciation Fund | Ariel Focus vs. Ariel Fund Investor | Ariel Focus vs. Ariel Global Fund | Ariel Focus vs. Ariel International 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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