Correlation Between Avantis International and Avantis Us
Can any of the company-specific risk be diversified away by investing in both Avantis International and Avantis Us 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 Avantis International and Avantis Us into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avantis International Equity and Avantis Equity, you can compare the effects of market volatilities on Avantis International and Avantis Us 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 Avantis International with a short position of Avantis Us. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avantis International and Avantis Us.
Diversification Opportunities for Avantis International and Avantis Us
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Avantis and Avantis is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Avantis International Equity and Avantis Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis Equity and Avantis 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 Avantis International Equity are associated (or correlated) with Avantis Us. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis Equity has no effect on the direction of Avantis International i.e., Avantis International and Avantis Us go up and down completely randomly.
Pair Corralation between Avantis International and Avantis Us
Assuming the 90 days horizon Avantis International is expected to generate 2.14 times less return on investment than Avantis Us. But when comparing it to its historical volatility, Avantis International Equity is 1.01 times less risky than Avantis Us. It trades about 0.07 of its potential returns per unit of risk. Avantis Equity is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,488 in Avantis Equity on September 3, 2024 and sell it today you would earn a total of 473.00 from holding Avantis Equity or generate 31.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avantis International Equity vs. Avantis Equity
Performance |
| Timeline |
| Avantis International |
| Avantis Equity |
Avantis International and Avantis Us Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avantis International and Avantis Us
The main advantage of trading using opposite Avantis International and Avantis Us positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avantis International position performs unexpectedly, Avantis Us 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 Avantis Us will offset losses from the drop in Avantis Us' long position.The idea behind Avantis International Equity and Avantis Equity pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Avantis Us vs. Vanguard Total Stock | Avantis Us vs. Vanguard 500 Index | Avantis Us vs. Vanguard Total Stock | Avantis Us vs. Vanguard Total Stock |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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