Correlation Between Eafe Choice and International Equity
Can any of the company-specific risk be diversified away by investing in both Eafe Choice and International Equity 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 Eafe Choice and International Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Eafe Choice and The International Equity, you can compare the effects of market volatilities on Eafe Choice and International Equity 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 Eafe Choice with a short position of International Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eafe Choice and International Equity.
Diversification Opportunities for Eafe Choice and International Equity
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Eafe and International is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding The Eafe Choice and The International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The International Equity and Eafe Choice 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 The Eafe Choice are associated (or correlated) with International Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The International Equity has no effect on the direction of Eafe Choice i.e., Eafe Choice and International Equity go up and down completely randomly.
Pair Corralation between Eafe Choice and International Equity
Assuming the 90 days horizon The Eafe Choice is expected to under-perform the International Equity. In addition to that, Eafe Choice is 1.19 times more volatile than The International Equity. It trades about -0.14 of its total potential returns per unit of risk. The International Equity is currently generating about -0.09 per unit of volatility. If you would invest 1,383 in The International Equity on August 31, 2024 and sell it today you would lose (19.00) from holding The International Equity or give up 1.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Eafe Choice vs. The International Equity
Performance |
| Timeline |
| Eafe Choice |
| The International Equity |
Eafe Choice and International Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eafe Choice and International Equity
The main advantage of trading using opposite Eafe Choice and International Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eafe Choice position performs unexpectedly, International Equity 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 International Equity will offset losses from the drop in International Equity's long position.| Eafe Choice vs. Aim Investment Secs | Eafe Choice vs. Meeder Funds | Eafe Choice vs. T Rowe Price | Eafe Choice vs. Jpmorgan Trust I |
| International Equity vs. Alpine High Yield | International Equity vs. Mesirow Financial High | International Equity vs. Dunham High Yield | International Equity vs. Fidelity Capital Income |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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