Correlation Between World Ex and World Core
Can any of the company-specific risk be diversified away by investing in both World Ex and World 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 World Ex and World Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between World Ex Core and World Core Equity, you can compare the effects of market volatilities on World Ex and World 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 World Ex with a short position of World Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Ex and World Core.
Diversification Opportunities for World Ex and World Core
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between World and World is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding World Ex Core and World Core Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Core Equity and World Ex 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 World Ex Core are associated (or correlated) with World Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Core Equity has no effect on the direction of World Ex i.e., World Ex and World Core go up and down completely randomly.
Pair Corralation between World Ex and World Core
Assuming the 90 days horizon World Ex is expected to generate 1.57 times less return on investment than World Core. But when comparing it to its historical volatility, World Ex Core is 1.02 times less risky than World Core. It trades about 0.06 of its potential returns per unit of risk. World Core Equity is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,836 in World Core Equity on September 3, 2024 and sell it today you would earn a total of 723.00 from holding World Core Equity or generate 39.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
World Ex Core vs. World Core Equity
Performance |
| Timeline |
| World Ex Core |
| World Core Equity |
World Ex and World Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with World Ex and World Core
The main advantage of trading using opposite World Ex and World Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Ex position performs unexpectedly, World 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 World Core will offset losses from the drop in World Core's long position.| World Ex vs. Artisan Small Cap | World Ex vs. Chase Growth Fund | World Ex vs. Small Pany Growth | World Ex vs. Pace Smallmedium Growth |
| World Core vs. American Funds Capital | World Core vs. American Funds Capital | World Core vs. Capital World Growth | World Core vs. Capital World Growth |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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