Correlation Between International Equity and Global Diversified
Can any of the company-specific risk be diversified away by investing in both International Equity and Global Diversified 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 International Equity and Global Diversified into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Equity Index and Global Diversified Income, you can compare the effects of market volatilities on International Equity and Global Diversified 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 International Equity with a short position of Global Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Equity and Global Diversified.
Diversification Opportunities for International Equity and Global Diversified
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between International and Global is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding International Equity Index and Global Diversified Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Diversified Income and International Equity 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 International Equity Index are associated (or correlated) with Global Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Diversified Income has no effect on the direction of International Equity i.e., International Equity and Global Diversified go up and down completely randomly.
Pair Corralation between International Equity and Global Diversified
Assuming the 90 days horizon International Equity Index is expected to generate 3.37 times more return on investment than Global Diversified. However, International Equity is 3.37 times more volatile than Global Diversified Income. It trades about 0.05 of its potential returns per unit of risk. Global Diversified Income is currently generating about 0.1 per unit of risk. If you would invest 979.00 in International Equity Index on September 4, 2024 and sell it today you would earn a total of 209.00 from holding International Equity Index or generate 21.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Equity Index vs. Global Diversified Income
Performance |
| Timeline |
| International Equity |
| Global Diversified Income |
International Equity and Global Diversified Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Equity and Global Diversified
The main advantage of trading using opposite International Equity and Global Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Equity position performs unexpectedly, Global Diversified 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 Global Diversified will offset losses from the drop in Global Diversified's long position.| International Equity vs. Multimedia Portfolio Multimedia | International Equity vs. Rbc Global Equity | International Equity vs. Cutler Equity | International Equity vs. Jpmorgan Equity Income |
| Global Diversified vs. Columbia Real Estate | Global Diversified vs. Commonwealth Real Estate | Global Diversified vs. Amg Managers Centersquare | Global Diversified vs. Pender Real Estate |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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