Correlation Between International Small and International Equity
Can any of the company-specific risk be diversified away by investing in both International Small 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 International Small and International Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Small Pany and International Equity Index, you can compare the effects of market volatilities on International Small 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 International Small with a short position of International Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Small and International Equity.
Diversification Opportunities for International Small and International Equity
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between International and International is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding International Small Pany and International Equity Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Equity and International Small 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 Small Pany 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 International Small i.e., International Small and International Equity go up and down completely randomly.
Pair Corralation between International Small and International Equity
Assuming the 90 days horizon International Small is expected to generate 1.25 times less return on investment than International Equity. In addition to that, International Small is 1.04 times more volatile than International Equity Index. It trades about 0.04 of its total potential returns per unit of risk. International Equity Index is currently generating about 0.05 per unit of volatility. If you would invest 962.00 in International Equity Index on August 29, 2024 and sell it today you would earn a total of 206.00 from holding International Equity Index or generate 21.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Small Pany vs. International Equity Index
Performance |
| Timeline |
| International Small Pany |
| International Equity |
International Small and International Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Small and International Equity
The main advantage of trading using opposite International Small and International Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Small 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.| International Small vs. Goldman Sachs International | International Small vs. Goldman Sachs International | International Small vs. HUMANA INC | International Small vs. Aquagold International |
| International Equity vs. Fidelity Advisor Gold | International Equity vs. Precious Metals And | International Equity vs. Short Precious Metals | International Equity vs. Gamco Global Gold |
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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