Correlation Between International Small and Strategic Asset
Can any of the company-specific risk be diversified away by investing in both International Small 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 Small 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 Small Pany and Strategic Asset Management, you can compare the effects of market volatilities on International Small 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 Small with a short position of Strategic Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Small and Strategic Asset.
Diversification Opportunities for International Small and Strategic Asset
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between International and Strategic is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding International Small Pany 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 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 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 Small i.e., International Small and Strategic Asset go up and down completely randomly.
Pair Corralation between International Small and Strategic Asset
Assuming the 90 days horizon International Small Pany is expected to under-perform the Strategic Asset. But the mutual fund apears to be less risky and, when comparing its historical volatility, International Small Pany is 1.0 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 0.0 of returns per unit of risk over similar time horizon. If you would invest 1,973 in Strategic Asset Management on November 2, 2024 and sell it today you would lose (2.00) from holding Strategic Asset Management or give up 0.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Small Pany vs. Strategic Asset Management
Performance |
| Timeline |
| International Small Pany |
| Strategic Asset Mana |
International Small and Strategic Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Small and Strategic Asset
The main advantage of trading using opposite International Small and Strategic Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Small 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 Small Pany 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.
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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