Correlation Between Ariel Focus and Ariel International
Can any of the company-specific risk be diversified away by investing in both Ariel Focus and Ariel 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 Ariel Focus and Ariel International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ariel Focus Fund and Ariel International Fund, you can compare the effects of market volatilities on Ariel Focus and Ariel 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 Ariel Focus with a short position of Ariel International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ariel Focus and Ariel International.
Diversification Opportunities for Ariel Focus and Ariel International
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ariel and Ariel is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Ariel Focus Fund and Ariel International Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ariel International and Ariel Focus 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 Focus Fund are associated (or correlated) with Ariel International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ariel International has no effect on the direction of Ariel Focus i.e., Ariel Focus and Ariel International go up and down completely randomly.
Pair Corralation between Ariel Focus and Ariel International
Assuming the 90 days horizon Ariel Focus Fund is expected to under-perform the Ariel International. But the mutual fund apears to be less risky and, when comparing its historical volatility, Ariel Focus Fund is 1.1 times less risky than Ariel International. The mutual fund trades about -0.24 of its potential returns per unit of risk. The Ariel International Fund is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 1,445 in Ariel International Fund on November 27, 2024 and sell it today you would earn a total of 82.00 from holding Ariel International Fund or generate 5.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ariel Focus Fund vs. Ariel International Fund
Performance |
| Timeline |
| Ariel Focus Fund |
| Ariel International |
Ariel Focus and Ariel International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ariel Focus and Ariel International
The main advantage of trading using opposite Ariel Focus and Ariel International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ariel Focus position performs unexpectedly, Ariel 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 Ariel International will offset losses from the drop in Ariel International's long position.| Ariel Focus vs. Ariel Appreciation Fund | Ariel Focus vs. Ariel Fund Investor | Ariel Focus vs. Ariel Global Fund | Ariel Focus vs. Ariel International Fund |
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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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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