Correlation Between International Core and Us Core
Can any of the company-specific risk be diversified away by investing in both International Core and Us Core 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 Core and Us Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International E Equity and Us E Equity, you can compare the effects of market volatilities on International Core and Us Core 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 Core with a short position of Us Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Core and Us Core.
Diversification Opportunities for International Core and Us Core
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between International and DFEOX is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding International E Equity and Us E Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us E Equity and International Core 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 International E Equity are associated (or correlated) with Us Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us E Equity has no effect on the direction of International Core i.e., International Core and Us Core go up and down completely randomly.
Pair Corralation between International Core and Us Core
Assuming the 90 days horizon International Core is expected to generate 1.2 times less return on investment than Us Core. But when comparing it to its historical volatility, International E Equity is 1.12 times less risky than Us Core. It trades about 0.05 of its potential returns per unit of risk. Us E Equity is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3,035 in Us E Equity on January 21, 2025 and sell it today you would earn a total of 756.00 from holding Us E Equity or generate 24.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International E Equity vs. Us E Equity
Performance |
| Timeline |
| International E Equity |
| Us E Equity |
International Core and Us Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Core and Us Core
The main advantage of trading using opposite International Core and Us Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Core position performs unexpectedly, Us Core 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 Us Core will offset losses from the drop in Us Core's long position.| International Core vs. Emerging Markets E | International Core vs. Us E Equity | International Core vs. Us E Equity | International Core vs. Dfa Real Estate |
| Us Core vs. International E Equity | Us Core vs. Emerging Markets E | Us Core vs. Dfa Real Estate | Us Core vs. Dfa Five Year Global |
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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