Correlation Between Salient International and Salient Select
Can any of the company-specific risk be diversified away by investing in both Salient International and Salient Select 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 Salient International and Salient Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Salient International Real and Salient Select Income, you can compare the effects of market volatilities on Salient International and Salient Select 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 Salient International with a short position of Salient Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salient International and Salient Select.
Diversification Opportunities for Salient International and Salient Select
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Salient and Salient is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Salient International Real and Salient Select Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salient Select Income and Salient International 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 Salient International Real are associated (or correlated) with Salient Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salient Select Income has no effect on the direction of Salient International i.e., Salient International and Salient Select go up and down completely randomly.
Pair Corralation between Salient International and Salient Select
Assuming the 90 days horizon Salient International is expected to generate 1.13 times less return on investment than Salient Select. In addition to that, Salient International is 1.98 times more volatile than Salient Select Income. It trades about 0.06 of its total potential returns per unit of risk. Salient Select Income is currently generating about 0.14 per unit of volatility. If you would invest 1,696 in Salient Select Income on September 1, 2024 and sell it today you would earn a total of 198.00 from holding Salient Select Income or generate 11.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Salient International Real vs. Salient Select Income
Performance |
| Timeline |
| Salient International |
| Salient Select Income |
Salient International and Salient Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Salient International and Salient Select
The main advantage of trading using opposite Salient International and Salient Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salient International position performs unexpectedly, Salient Select 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 Salient Select will offset losses from the drop in Salient Select's long position.| Salient International vs. Salient Tactical Plus | Salient International vs. Salient Tactical Plus | Salient International vs. Salient Tactical Growth | Salient International vs. Salient Tactical Growth |
| Salient Select vs. Salient Select Income | Salient Select vs. Ivy High Income | Salient Select vs. Salient Select Income | Salient Select vs. Salient International Real |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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