Correlation Between Long Term and International Equity
Can any of the company-specific risk be diversified away by investing in both Long Term 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 Long Term 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 Long Term and The International Equity, you can compare the effects of market volatilities on Long Term 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 Long Term with a short position of International Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Long Term and International Equity.
Diversification Opportunities for Long Term and International Equity
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Long and International is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding The Long Term 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 Long Term 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 Long Term 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 Long Term i.e., Long Term and International Equity go up and down completely randomly.
Pair Corralation between Long Term and International Equity
Assuming the 90 days horizon The Long Term is expected to generate 1.51 times more return on investment than International Equity. However, Long Term is 1.51 times more volatile than The International Equity. It trades about 0.1 of its potential returns per unit of risk. The International Equity is currently generating about 0.07 per unit of risk. If you would invest 2,496 in The Long Term on September 2, 2024 and sell it today you would earn a total of 903.00 from holding The Long Term or generate 36.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Long Term vs. The International Equity
Performance |
| Timeline |
| Long Term |
| The International Equity |
Long Term and International Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Long Term and International Equity
The main advantage of trading using opposite Long Term and International Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Long Term 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.| Long Term vs. John Hancock Money | Long Term vs. Aig Government Money | Long Term vs. Dreyfus Institutional Reserves | Long Term vs. T Rowe Price |
| International Equity vs. The Eafe Pure | International Equity vs. The Long Term | International Equity vs. Baillie Gifford China | International Equity vs. Baillie Gifford China |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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