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
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between International and STRATEGIC is 0.4. 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. In addition to that, International Equity is 3.14 times more volatile than Strategic Asset Management. It trades about -0.01 of its total potential returns per unit of risk. Strategic Asset Management is currently generating about 0.32 per unit of volatility. If you would invest 1,202 in Strategic Asset Management on September 5, 2024 and sell it today you would earn a total of 23.00 from holding Strategic Asset Management or generate 1.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| 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.The idea behind International Equity Index and Strategic Asset Management pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Strategic Asset vs. Strategic Asset Management | Strategic Asset vs. Strategic Asset Management | Strategic Asset vs. Strategic Asset Management | Strategic Asset vs. International Equity Index |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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