Correlation Between Balanced Strategy and International Opportunity
Can any of the company-specific risk be diversified away by investing in both Balanced Strategy and International Opportunity 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 Balanced Strategy and International Opportunity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balanced Strategy Fund and International Opportunity Portfolio, you can compare the effects of market volatilities on Balanced Strategy and International Opportunity 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 Balanced Strategy with a short position of International Opportunity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Strategy and International Opportunity.
Diversification Opportunities for Balanced Strategy and International Opportunity
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Balanced and International is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Strategy Fund and International Opportunity Port in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Opportunity and Balanced Strategy 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 Balanced Strategy Fund are associated (or correlated) with International Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Opportunity has no effect on the direction of Balanced Strategy i.e., Balanced Strategy and International Opportunity go up and down completely randomly.
Pair Corralation between Balanced Strategy and International Opportunity
Assuming the 90 days horizon Balanced Strategy is expected to generate 1.23 times less return on investment than International Opportunity. But when comparing it to its historical volatility, Balanced Strategy Fund is 1.35 times less risky than International Opportunity. It trades about 0.11 of its potential returns per unit of risk. International Opportunity Portfolio is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,922 in International Opportunity Portfolio on October 25, 2024 and sell it today you would earn a total of 38.00 from holding International Opportunity Portfolio or generate 1.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Balanced Strategy Fund vs. International Opportunity Port
Performance |
| Timeline |
| Balanced Strategy |
| International Opportunity |
Balanced Strategy and International Opportunity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balanced Strategy and International Opportunity
The main advantage of trading using opposite Balanced Strategy and International Opportunity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balanced Strategy position performs unexpectedly, International Opportunity 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 Opportunity will offset losses from the drop in International Opportunity's long position.| Balanced Strategy vs. Schwab Government Money | Balanced Strategy vs. Hsbc Treasury Money | Balanced Strategy vs. Vanguard Money Market | Balanced Strategy vs. Hewitt Money Market |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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