Correlation Between International and Us Small
Can any of the company-specific risk be diversified away by investing in both International and Us Small 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 and Us Small 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 Small Cap, you can compare the effects of market volatilities on International and Us Small 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 with a short position of Us Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of International and Us Small.
Diversification Opportunities for International and Us Small
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between International and DFSVX is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding International E Equity and Us Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Small Cap and International 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 Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Small Cap has no effect on the direction of International i.e., International and Us Small go up and down completely randomly.
Pair Corralation between International and Us Small
Assuming the 90 days horizon International E Equity is expected to under-perform the Us Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, International E Equity is 1.62 times less risky than Us Small. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Us Small Cap is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 4,581 in Us Small Cap on August 24, 2024 and sell it today you would earn a total of 587.00 from holding Us Small Cap or generate 12.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International E Equity vs. Us Small Cap
Performance |
| Timeline |
| International E Equity |
| Us Small Cap |
International and Us Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International and Us Small
The main advantage of trading using opposite International and Us Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International position performs unexpectedly, Us Small 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 Small will offset losses from the drop in Us Small's long position.| International vs. Emerging Markets E | International vs. Us E Equity | International vs. Us E Equity | International vs. Dfa Real Estate |
| Us Small vs. Us Micro Cap | Us Small vs. Dfa International Small | Us Small vs. Us Large Cap | Us Small vs. International Small Pany |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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