Correlation Between Eafe Pure and International Equity
Can any of the company-specific risk be diversified away by investing in both Eafe Pure 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 Pure 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 Pure and The International Equity, you can compare the effects of market volatilities on Eafe Pure 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 Pure with a short position of International Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eafe Pure and International Equity.
Diversification Opportunities for Eafe Pure and International Equity
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Eafe and International is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding The Eafe Pure 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 Pure 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 Pure 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 Pure i.e., Eafe Pure and International Equity go up and down completely randomly.
Pair Corralation between Eafe Pure and International Equity
Assuming the 90 days horizon Eafe Pure is expected to generate 1.55 times less return on investment than International Equity. In addition to that, Eafe Pure is 1.16 times more volatile than The International Equity. It trades about 0.04 of its total potential returns per unit of risk. The International Equity is currently generating about 0.07 per unit of volatility. If you would invest 1,204 in The International Equity on September 2, 2024 and sell it today you would earn a total of 172.00 from holding The International Equity or generate 14.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Eafe Pure vs. The International Equity
Performance |
| Timeline |
| Eafe Pure |
| The International Equity |
Eafe Pure and International Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eafe Pure and International Equity
The main advantage of trading using opposite Eafe Pure and International Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eafe Pure 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 Pure vs. Ab Global Risk | Eafe Pure vs. Federated Global Allocation | Eafe Pure vs. T Rowe Price | Eafe Pure vs. Ms Global Fixed |
| 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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