Correlation Between Small Cap and International Portfolio
Can any of the company-specific risk be diversified away by investing in both Small Cap and International Portfolio 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 Small Cap and International Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Equity and International Portfolio International, you can compare the effects of market volatilities on Small Cap and International Portfolio 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 Small Cap with a short position of International Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and International Portfolio.
Diversification Opportunities for Small Cap and International Portfolio
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Small and International is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Equity and International Portfolio Intern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Portfolio and Small Cap 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 Small Cap Equity are associated (or correlated) with International Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Portfolio has no effect on the direction of Small Cap i.e., Small Cap and International Portfolio go up and down completely randomly.
Pair Corralation between Small Cap and International Portfolio
Assuming the 90 days horizon Small Cap is expected to generate 1.77 times less return on investment than International Portfolio. In addition to that, Small Cap is 2.0 times more volatile than International Portfolio International. It trades about 0.02 of its total potential returns per unit of risk. International Portfolio International is currently generating about 0.08 per unit of volatility. If you would invest 1,284 in International Portfolio International on August 30, 2024 and sell it today you would earn a total of 377.00 from holding International Portfolio International or generate 29.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Equity vs. International Portfolio Intern
Performance |
| Timeline |
| Small Cap Equity |
| International Portfolio |
Small Cap and International Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and International Portfolio
The main advantage of trading using opposite Small Cap and International Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, International Portfolio 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 Portfolio will offset losses from the drop in International Portfolio's long position.| Small Cap vs. Vanguard Small Cap Index | Small Cap vs. Vanguard Small Cap Index | Small Cap vs. Vanguard Small Cap Index | Small Cap vs. Vanguard Small Cap Index |
| International Portfolio vs. HUMANA INC | International Portfolio vs. Aquagold International | International Portfolio vs. Barloworld Ltd ADR | International Portfolio vs. Morningstar Unconstrained 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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