Correlation Between Blue Chip and International Equity
Can any of the company-specific risk be diversified away by investing in both Blue Chip 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 Blue Chip and International Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Blue Chip Fund and International Equity Index, you can compare the effects of market volatilities on Blue Chip 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 Blue Chip with a short position of International Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Chip and International Equity.
Diversification Opportunities for Blue Chip and International Equity
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Blue and International is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Blue Chip Fund and International Equity Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Equity and Blue Chip 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 Blue Chip Fund 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 Blue Chip i.e., Blue Chip and International Equity go up and down completely randomly.
Pair Corralation between Blue Chip and International Equity
Assuming the 90 days horizon Blue Chip Fund is expected to generate 1.15 times more return on investment than International Equity. However, Blue Chip is 1.15 times more volatile than International Equity Index. It trades about 0.11 of its potential returns per unit of risk. International Equity Index is currently generating about 0.05 per unit of risk. If you would invest 2,863 in Blue Chip Fund on August 24, 2024 and sell it today you would earn a total of 1,758 from holding Blue Chip Fund or generate 61.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Blue Chip Fund vs. International Equity Index
Performance |
| Timeline |
| Blue Chip Fund |
| International Equity |
Blue Chip and International Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Blue Chip and International Equity
The main advantage of trading using opposite Blue Chip and International Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Chip 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.| Blue Chip vs. Invesco Global Health | Blue Chip vs. Live Oak Health | Blue Chip vs. Delaware Healthcare Fund | Blue Chip vs. Hartford Healthcare Hls |
| International Equity vs. Artisan Developing World | International Equity vs. Artisan High Income | International Equity vs. HUMANA INC | International Equity vs. Aquagold International |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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