Correlation Between Value Fund and International Equity
Can any of the company-specific risk be diversified away by investing in both Value Fund and International 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 Value Fund and International Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Value Fund Value and International Equity Fund, you can compare the effects of market volatilities on Value Fund and International 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 Value Fund with a short position of International Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Value Fund and International Equity.
Diversification Opportunities for Value Fund and International Equity
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Value and International is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Value Fund Value and International Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Equity and Value Fund 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 Value Fund Value are associated (or correlated) with International Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Equity has no effect on the direction of Value Fund i.e., Value Fund and International Equity go up and down completely randomly.
Pair Corralation between Value Fund and International Equity
Assuming the 90 days horizon Value Fund Value is expected to generate 0.9 times more return on investment than International Equity. However, Value Fund Value is 1.11 times less risky than International Equity. It trades about 0.27 of its potential returns per unit of risk. International Equity Fund is currently generating about -0.25 per unit of risk. If you would invest 5,541 in Value Fund Value on August 29, 2024 and sell it today you would earn a total of 246.00 from holding Value Fund Value or generate 4.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Value Fund Value vs. International Equity Fund
Performance |
| Timeline |
| Value Fund Value |
| International Equity |
Value Fund and International Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Value Fund and International Equity
The main advantage of trading using opposite Value Fund and International Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value Fund position performs unexpectedly, International 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 International Equity will offset losses from the drop in International Equity's long position.| Value Fund vs. International Equity Fund | Value Fund vs. Growth Fund Growth | Value Fund vs. Homestead Intermediate Bond | Value Fund vs. Short Term Bond Fund |
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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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