Correlation Between International Equity and Strategic Asset
Can any of the company-specific risk be diversified away by investing in both International Equity and Strategic Asset 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 Strategic Asset 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 Strategic Asset Management, you can compare the effects of market volatilities on International Equity and Strategic Asset 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 Strategic Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Equity and Strategic Asset.
Diversification Opportunities for International Equity and Strategic Asset
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between International and Strategic is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding International Equity Index and Strategic Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Asset Mana 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 Strategic Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Asset Mana has no effect on the direction of International Equity i.e., International Equity and Strategic Asset go up and down completely randomly.
Pair Corralation between International Equity and Strategic Asset
Assuming the 90 days horizon International Equity Index is expected to under-perform the Strategic Asset. But the mutual fund apears to be less risky and, when comparing its historical volatility, International Equity Index is 1.09 times less risky than Strategic Asset. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Strategic Asset Management is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,294 in Strategic Asset Management on November 2, 2024 and sell it today you would earn a total of 33.00 from holding Strategic Asset Management or generate 1.44% 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. Strategic Asset Management
Performance |
| Timeline |
| International Equity |
| Strategic Asset Mana |
International Equity and Strategic Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Equity and Strategic Asset
The main advantage of trading using opposite International Equity and Strategic Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Equity position performs unexpectedly, Strategic Asset 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 Strategic Asset will offset losses from the drop in Strategic Asset's long position.| International Equity vs. Tiaa Cref Inflation Link | International Equity vs. Arrow Managed Futures | International Equity vs. Ab Bond Inflation | International Equity vs. Asg Managed Futures |
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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