Correlation Between Avantis International and Avantis Short
Can any of the company-specific risk be diversified away by investing in both Avantis International and Avantis Short 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 Short 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 Short Term Fixed, you can compare the effects of market volatilities on Avantis International and Avantis Short 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 Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avantis International and Avantis Short.
Diversification Opportunities for Avantis International and Avantis Short
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Avantis and Avantis is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Avantis International Equity and Avantis Short Term Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis Short Term 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 Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis Short Term has no effect on the direction of Avantis International i.e., Avantis International and Avantis Short go up and down completely randomly.
Pair Corralation between Avantis International and Avantis Short
Assuming the 90 days horizon Avantis International Equity is expected to under-perform the Avantis Short. In addition to that, Avantis International is 5.24 times more volatile than Avantis Short Term Fixed. It trades about -0.11 of its total potential returns per unit of risk. Avantis Short Term Fixed is currently generating about -0.03 per unit of volatility. If you would invest 951.00 in Avantis Short Term Fixed on August 28, 2024 and sell it today you would lose (1.00) from holding Avantis Short Term Fixed or give up 0.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avantis International Equity vs. Avantis Short Term Fixed
Performance |
| Timeline |
| Avantis International |
| Avantis Short Term |
Avantis International and Avantis Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avantis International and Avantis Short
The main advantage of trading using opposite Avantis International and Avantis Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avantis International position performs unexpectedly, Avantis Short 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 Short will offset losses from the drop in Avantis Short's long position.| Avantis International vs. Avantis International Small | Avantis International vs. American Century Etf | Avantis International vs. American Century Etf | Avantis International vs. Avantis Emerging Markets |
| Avantis Short vs. Avantis International Small | Avantis Short vs. American Century Etf | Avantis Short vs. Avantis International Equity | Avantis Short vs. American Century Etf |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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