Correlation Between Growth Portfolio and International Opportunity
Can any of the company-specific risk be diversified away by investing in both Growth Portfolio and International Opportunity 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 Growth Portfolio and International Opportunity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Portfolio Class and International Opportunity Portfolio, you can compare the effects of market volatilities on Growth Portfolio and International Opportunity 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 Growth Portfolio with a short position of International Opportunity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Portfolio and International Opportunity.
Diversification Opportunities for Growth Portfolio and International Opportunity
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Growth and International is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Growth Portfolio Class and International Opportunity Port in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Opportunity and Growth Portfolio 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 Growth Portfolio Class are associated (or correlated) with International Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Opportunity has no effect on the direction of Growth Portfolio i.e., Growth Portfolio and International Opportunity go up and down completely randomly.
Pair Corralation between Growth Portfolio and International Opportunity
Assuming the 90 days horizon Growth Portfolio Class is expected to generate 1.61 times more return on investment than International Opportunity. However, Growth Portfolio is 1.61 times more volatile than International Opportunity Portfolio. It trades about 0.23 of its potential returns per unit of risk. International Opportunity Portfolio is currently generating about 0.1 per unit of risk. If you would invest 3,288 in Growth Portfolio Class on August 30, 2024 and sell it today you would earn a total of 1,906 from holding Growth Portfolio Class or generate 57.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Portfolio Class vs. International Opportunity Port
Performance |
| Timeline |
| Growth Portfolio Class |
| International Opportunity |
Growth Portfolio and International Opportunity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Portfolio and International Opportunity
The main advantage of trading using opposite Growth Portfolio and International Opportunity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Portfolio position performs unexpectedly, International Opportunity 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 Opportunity will offset losses from the drop in International Opportunity's long position.| Growth Portfolio vs. Mid Cap Growth | Growth Portfolio vs. Morgan Stanley Multi | Growth Portfolio vs. Small Pany Growth | Growth Portfolio vs. Blackrock Science Technology |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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