Correlation Between International Stock and Western Assets
Can any of the company-specific risk be diversified away by investing in both International Stock and Western Assets 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 Western Assets 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 Western Assets Emerging, you can compare the effects of market volatilities on International Stock and Western Assets 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 Western Assets. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Stock and Western Assets.
Diversification Opportunities for International Stock and Western Assets
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between International and Western is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding International Stock Fund and Western Assets Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Assets Emerging 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 Western Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Assets Emerging has no effect on the direction of International Stock i.e., International Stock and Western Assets go up and down completely randomly.
Pair Corralation between International Stock and Western Assets
Assuming the 90 days horizon International Stock Fund is expected to generate 2.37 times more return on investment than Western Assets. However, International Stock is 2.37 times more volatile than Western Assets Emerging. It trades about 0.27 of its potential returns per unit of risk. Western Assets Emerging is currently generating about 0.09 per unit of risk. If you would invest 2,279 in International Stock Fund on November 1, 2024 and sell it today you would earn a total of 97.00 from holding International Stock Fund or generate 4.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
International Stock Fund vs. Western Assets Emerging
Performance |
| Timeline |
| International Stock |
| Western Assets Emerging |
International Stock and Western Assets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Stock and Western Assets
The main advantage of trading using opposite International Stock and Western Assets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Stock position performs unexpectedly, Western Assets 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 Western Assets will offset losses from the drop in Western Assets' long position.| International Stock vs. Western Assets Emerging | International Stock vs. Doubleline Emerging Markets | International Stock vs. Barings Emerging Markets | International Stock vs. Ashmore Emerging Markets |
| Western Assets vs. Us Government Securities | Western Assets vs. Schwab Government Money | Western Assets vs. Us Government Securities | Western Assets vs. Aig Government Money |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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