Correlation Between Small Pany and International Equity
Can any of the company-specific risk be diversified away by investing in both Small Pany 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 Small Pany and International Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Pany Growth and International Equity Index, you can compare the effects of market volatilities on Small Pany 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 Small Pany with a short position of International Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Pany and International Equity.
Diversification Opportunities for Small Pany and International Equity
-0.88 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Small and International is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Small Pany Growth and International Equity Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Equity and Small Pany 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 Pany Growth 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 Small Pany i.e., Small Pany and International Equity go up and down completely randomly.
Pair Corralation between Small Pany and International Equity
Assuming the 90 days horizon Small Pany Growth is expected to generate 2.41 times more return on investment than International Equity. However, Small Pany is 2.41 times more volatile than International Equity Index. It trades about 0.08 of its potential returns per unit of risk. International Equity Index is currently generating about 0.02 per unit of risk. If you would invest 1,218 in Small Pany Growth on September 12, 2024 and sell it today you would earn a total of 487.00 from holding Small Pany Growth or generate 39.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 96.36% |
| Values | Daily Returns |
Small Pany Growth vs. International Equity Index
Performance |
| Timeline |
| Small Pany Growth |
| International Equity |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Small Pany and International Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Pany and International Equity
The main advantage of trading using opposite Small Pany and International Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Pany 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.| Small Pany vs. Mid Cap Growth | Small Pany vs. Growth Portfolio Class | Small Pany vs. Morgan Stanley Multi | Small Pany vs. Emerging Markets Portfolio |
| International Equity vs. Kinetics Small Cap | International Equity vs. Cardinal Small Cap | International Equity vs. Small Pany Growth | International Equity vs. Lebenthal Lisanti Small |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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