Correlation Between International Equity and Eafe Pure
Can any of the company-specific risk be diversified away by investing in both International Equity and Eafe Pure 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 International Equity and Eafe Pure into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The International Equity and The Eafe Pure, you can compare the effects of market volatilities on International Equity and Eafe Pure 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 International Equity with a short position of Eafe Pure. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Equity and Eafe Pure.
Diversification Opportunities for International Equity and Eafe Pure
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between International and Eafe is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding The International Equity and The Eafe Pure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eafe Pure and International Equity 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 International Equity are associated (or correlated) with Eafe Pure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eafe Pure has no effect on the direction of International Equity i.e., International Equity and Eafe Pure go up and down completely randomly.
Pair Corralation between International Equity and Eafe Pure
Assuming the 90 days horizon The International Equity is expected to generate 0.92 times more return on investment than Eafe Pure. However, The International Equity is 1.09 times less risky than Eafe Pure. It trades about 0.05 of its potential returns per unit of risk. The Eafe Pure is currently generating about 0.02 per unit of risk. If you would invest 1,101 in The International Equity on September 2, 2024 and sell it today you would earn a total of 263.00 from holding The International Equity or generate 23.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The International Equity vs. The Eafe Pure
Performance |
| Timeline |
| The International Equity |
| Eafe Pure |
International Equity and Eafe Pure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Equity and Eafe Pure
The main advantage of trading using opposite International Equity and Eafe Pure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Equity position performs unexpectedly, Eafe Pure 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 Eafe Pure will offset losses from the drop in Eafe Pure's long position.| International Equity vs. The Eafe Pure | International Equity vs. The Long Term | International Equity vs. Baillie Gifford China | International Equity vs. Baillie Gifford China |
| Eafe Pure vs. Ab Global Risk | Eafe Pure vs. Federated Global Allocation | Eafe Pure vs. T Rowe Price | Eafe Pure vs. Ms Global Fixed |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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