Correlation Between International Stock and Bridge Builder
Can any of the company-specific risk be diversified away by investing in both International Stock and Bridge Builder 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 Bridge Builder 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 Bridge Builder Smallmid, you can compare the effects of market volatilities on International Stock and Bridge Builder 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 Bridge Builder. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Stock and Bridge Builder.
Diversification Opportunities for International Stock and Bridge Builder
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between International and Bridge is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding International Stock Fund and Bridge Builder Smallmid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridge Builder Smallmid 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 Bridge Builder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridge Builder Smallmid has no effect on the direction of International Stock i.e., International Stock and Bridge Builder go up and down completely randomly.
Pair Corralation between International Stock and Bridge Builder
Assuming the 90 days horizon International Stock Fund is expected to under-perform the Bridge Builder. But the mutual fund apears to be less risky and, when comparing its historical volatility, International Stock Fund is 1.3 times less risky than Bridge Builder. The mutual fund trades about -0.18 of its potential returns per unit of risk. The Bridge Builder Smallmid is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 1,598 in Bridge Builder Smallmid on August 30, 2024 and sell it today you would earn a total of 130.00 from holding Bridge Builder Smallmid or generate 8.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Stock Fund vs. Bridge Builder Smallmid
Performance |
| Timeline |
| International Stock |
| Bridge Builder Smallmid |
International Stock and Bridge Builder Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Stock and Bridge Builder
The main advantage of trading using opposite International Stock and Bridge Builder positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Stock position performs unexpectedly, Bridge Builder 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 Bridge Builder will offset losses from the drop in Bridge Builder's long position.| International Stock vs. Dreyfus High Yield | International Stock vs. Dreyfusthe Boston Pany | International Stock vs. Dreyfus International Bond | International Stock vs. Dreyfus International Bond |
| Bridge Builder vs. Bridge Builder E | Bridge Builder vs. Bridge Builder Large | Bridge Builder vs. Bridge Builder International | Bridge Builder vs. Bridge Builder Municipal |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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