Correlation Between International Equity and Alliancebernstein
Can any of the company-specific risk be diversified away by investing in both International Equity and Alliancebernstein 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 Equity and Alliancebernstein into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Equity Investor and Alliancebernstein National Municipal, you can compare the effects of market volatilities on International Equity and Alliancebernstein 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 Equity with a short position of Alliancebernstein. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Equity and Alliancebernstein.
Diversification Opportunities for International Equity and Alliancebernstein
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between International and Alliancebernstein is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding International Equity Investor and Alliancebernstein National Mun in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliancebernstein and International Equity 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 Equity Investor are associated (or correlated) with Alliancebernstein. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliancebernstein has no effect on the direction of International Equity i.e., International Equity and Alliancebernstein go up and down completely randomly.
Pair Corralation between International Equity and Alliancebernstein
Assuming the 90 days horizon International Equity is expected to generate 1.6 times less return on investment than Alliancebernstein. In addition to that, International Equity is 1.3 times more volatile than Alliancebernstein National Municipal. It trades about 0.04 of its total potential returns per unit of risk. Alliancebernstein National Municipal is currently generating about 0.08 per unit of volatility. If you would invest 970.00 in Alliancebernstein National Municipal on September 12, 2024 and sell it today you would earn a total of 172.00 from holding Alliancebernstein National Municipal or generate 17.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Equity Investor vs. Alliancebernstein National Mun
Performance |
| Timeline |
| International Equity |
| Alliancebernstein |
International Equity and Alliancebernstein Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Equity and Alliancebernstein
The main advantage of trading using opposite International Equity and Alliancebernstein positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Equity position performs unexpectedly, Alliancebernstein 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 Alliancebernstein will offset losses from the drop in Alliancebernstein's long position.The idea behind International Equity Investor and Alliancebernstein National Municipal pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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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