Correlation Between Large Company and Focused International
Can any of the company-specific risk be diversified away by investing in both Large Company and Focused 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 Large Company and Focused International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Large Pany Value and Focused International Growth, you can compare the effects of market volatilities on Large Company and Focused 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 Large Company with a short position of Focused International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large Company and Focused International.
Diversification Opportunities for Large Company and Focused International
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Large and Focused is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Large Pany Value and Focused International Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focused International and Large Company 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 Large Pany Value are associated (or correlated) with Focused International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focused International has no effect on the direction of Large Company i.e., Large Company and Focused International go up and down completely randomly.
Pair Corralation between Large Company and Focused International
Assuming the 90 days horizon Large Pany Value is expected to generate 0.65 times more return on investment than Focused International. However, Large Pany Value is 1.54 times less risky than Focused International. It trades about 0.09 of its potential returns per unit of risk. Focused International Growth is currently generating about 0.02 per unit of risk. If you would invest 949.00 in Large Pany Value on September 2, 2024 and sell it today you would earn a total of 207.00 from holding Large Pany Value or generate 21.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Large Pany Value vs. Focused International Growth
Performance |
| Timeline |
| Large Pany Value |
| Focused International |
Large Company and Focused International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Large Company and Focused International
The main advantage of trading using opposite Large Company and Focused International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large Company position performs unexpectedly, Focused 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 Focused International will offset losses from the drop in Focused International's long position.| Large Company vs. Small Pany Fund | Large Company vs. Value Fund Investor | Large Company vs. Small Cap Value | Large Company vs. Real Estate Fund |
| Focused International vs. Mid Cap Value | Focused International vs. Equity Growth Fund | Focused International vs. Income Growth Fund | Focused International vs. Diversified Bond 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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