Correlation Between International Small and Us Large
Can any of the company-specific risk be diversified away by investing in both International Small and Us Large 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 Small and Us Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Small Pany and Us Large Pany, you can compare the effects of market volatilities on International Small and Us Large 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 Small with a short position of Us Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Small and Us Large.
Diversification Opportunities for International Small and Us Large
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between International and DFUSX is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding International Small Pany and Us Large Pany in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Large Pany and International Small 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 Small Pany are associated (or correlated) with Us Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Large Pany has no effect on the direction of International Small i.e., International Small and Us Large go up and down completely randomly.
Pair Corralation between International Small and Us Large
Assuming the 90 days horizon International Small Pany is expected to under-perform the Us Large. But the mutual fund apears to be less risky and, when comparing its historical volatility, International Small Pany is 1.16 times less risky than Us Large. The mutual fund trades about -0.14 of its potential returns per unit of risk. The Us Large Pany is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 3,865 in Us Large Pany on August 28, 2024 and sell it today you would earn a total of 102.00 from holding Us Large Pany or generate 2.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
International Small Pany vs. Us Large Pany
Performance |
| Timeline |
| International Small Pany |
| Us Large Pany |
International Small and Us Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Small and Us Large
The main advantage of trading using opposite International Small and Us Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Small position performs unexpectedly, Us Large 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 Large will offset losses from the drop in Us Large's long position.| International Small vs. Dfa International Small | International Small vs. Us Micro Cap | International Small vs. Dfa International Value | International Small vs. Us Large Cap |
| Us Large vs. Us Micro Cap | Us Large vs. Dfa Short Term Government | Us Large vs. Emerging Markets Small | Us Large vs. Aquagold International |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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