Correlation Between International Equity and Growth Equity
Can any of the company-specific risk be diversified away by investing in both International Equity and Growth 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 Equity and Growth Equity 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 Growth Equity Investor, you can compare the effects of market volatilities on International Equity and Growth 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 Equity with a short position of Growth Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Equity and Growth Equity.
Diversification Opportunities for International Equity and Growth Equity
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between INTERNATIONAL and Growth is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding International Equity Investor and Growth Equity Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Equity Investor 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 Growth Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Equity Investor has no effect on the direction of International Equity i.e., International Equity and Growth Equity go up and down completely randomly.
Pair Corralation between International Equity and Growth Equity
Assuming the 90 days horizon International Equity Investor is expected to generate 0.81 times more return on investment than Growth Equity. However, International Equity Investor is 1.24 times less risky than Growth Equity. It trades about 0.18 of its potential returns per unit of risk. Growth Equity Investor is currently generating about -0.07 per unit of risk. If you would invest 1,432 in International Equity Investor on November 27, 2024 and sell it today you would earn a total of 39.00 from holding International Equity Investor or generate 2.72% 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. Growth Equity Investor
Performance |
| Timeline |
| International Equity |
| Growth Equity Investor |
International Equity and Growth Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Equity and Growth Equity
The main advantage of trading using opposite International Equity and Growth Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Equity position performs unexpectedly, Growth 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 Growth Equity will offset losses from the drop in Growth Equity's long position.| International Equity vs. T Rowe Price | International Equity vs. Fidelity Small Cap | International Equity vs. Channing Intrinsic Value | International Equity vs. Valic Company I |
| Growth Equity vs. Ab Centrated International | Growth Equity vs. Qs Growth Fund | Growth Equity vs. Touchstone Sands Capital | Growth Equity vs. Rational Defensive 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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