Correlation Between Global Core and International Equity
Can any of the company-specific risk be diversified away by investing in both Global Core 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 Global Core and International Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global E Portfolio and International Equity Portfolio, you can compare the effects of market volatilities on Global Core 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 Global Core with a short position of International Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Core and International Equity.
Diversification Opportunities for Global Core and International Equity
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Global and International is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Global E Portfolio and International Equity Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Equity and Global Core 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 Global E Portfolio 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 Global Core i.e., Global Core and International Equity go up and down completely randomly.
Pair Corralation between Global Core and International Equity
Assuming the 90 days horizon Global E Portfolio is expected to generate 1.04 times more return on investment than International Equity. However, Global Core is 1.04 times more volatile than International Equity Portfolio. It trades about 0.1 of its potential returns per unit of risk. International Equity Portfolio is currently generating about 0.02 per unit of risk. If you would invest 1,869 in Global E Portfolio on September 1, 2024 and sell it today you would earn a total of 315.00 from holding Global E Portfolio or generate 16.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.47% |
| Values | Daily Returns |
Global E Portfolio vs. International Equity Portfolio
Performance |
| Timeline |
| Global E Portfolio |
| International Equity |
Global Core and International Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Core and International Equity
The main advantage of trading using opposite Global Core and International Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Core 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.| Global Core vs. Origin Emerging Markets | Global Core vs. Aqr Long Short Equity | Global Core vs. Goldman Sachs Emerging | Global Core vs. Doubleline Emerging Markets |
| International Equity vs. T Rowe Price | International Equity vs. Causeway International Value | International Equity vs. Short Term Fund Administrative | International Equity vs. Miller Opportunity Trust |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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