Correlation Between International Stock and International Equity
Can any of the company-specific risk be diversified away by investing in both International Stock 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 International Stock and International Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Stock Fund and International Equity Series, you can compare the effects of market volatilities on International Stock 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 International Stock with a short position of International Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Stock and International Equity.
Diversification Opportunities for International Stock and International Equity
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between International and International is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding International Stock Fund and International Equity Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Equity and International Stock 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 Stock Fund 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 International Equity has no effect on the direction of International Stock i.e., International Stock and International Equity go up and down completely randomly.
Pair Corralation between International Stock and International Equity
Assuming the 90 days horizon International Stock Fund is expected to under-perform the International Equity. In addition to that, International Stock is 1.06 times more volatile than International Equity Series. It trades about -0.02 of its total potential returns per unit of risk. International Equity Series is currently generating about 0.05 per unit of volatility. If you would invest 1,159 in International Equity Series on September 1, 2024 and sell it today you would earn a total of 95.00 from holding International Equity Series or generate 8.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.47% |
| Values | Daily Returns |
International Stock Fund vs. International Equity Series
Performance |
| Timeline |
| International Stock |
| International Equity |
International Stock and International Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Stock and International Equity
The main advantage of trading using opposite International Stock and International Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Stock 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.| International Stock vs. Dreyfusstandish Global Fixed | International Stock vs. Dreyfusstandish Global Fixed | International Stock vs. Dreyfus High Yield | International Stock vs. Dreyfus High Yield |
| International Equity vs. Foreign Smaller Panies | International Equity vs. International Equity Series | International Equity vs. T Rowe Price | International Equity vs. Franklin Growth Allocation |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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