Correlation Between Real Estate and International Growth
Can any of the company-specific risk be diversified away by investing in both Real Estate and International Growth 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 Real Estate and International Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Real Estate Fund and International Growth Fund, you can compare the effects of market volatilities on Real Estate and International Growth 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 Real Estate with a short position of International Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Real Estate and International Growth.
Diversification Opportunities for Real Estate and International Growth
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Real and International is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Real Estate Fund and International Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Growth and Real Estate 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 Real Estate Fund are associated (or correlated) with International Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Growth has no effect on the direction of Real Estate i.e., Real Estate and International Growth go up and down completely randomly.
Pair Corralation between Real Estate and International Growth
Assuming the 90 days horizon Real Estate Fund is expected to generate 1.29 times more return on investment than International Growth. However, Real Estate is 1.29 times more volatile than International Growth Fund. It trades about 0.01 of its potential returns per unit of risk. International Growth Fund is currently generating about -0.19 per unit of risk. If you would invest 2,808 in Real Estate Fund on August 27, 2024 and sell it today you would earn a total of 2.00 from holding Real Estate Fund or generate 0.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Real Estate Fund vs. International Growth Fund
Performance |
| Timeline |
| Real Estate Fund |
| International Growth |
Real Estate and International Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Real Estate and International Growth
The main advantage of trading using opposite Real Estate and International Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Real Estate position performs unexpectedly, International Growth 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 Growth will offset losses from the drop in International Growth's long position.| Real Estate vs. Utilities Fund Investor | Real Estate vs. Emerging Markets Fund | Real Estate vs. Heritage Fund Investor | Real Estate vs. Value Fund Investor |
| International Growth vs. Value Fund Investor | International Growth vs. Ultra Fund Investor | International Growth vs. Growth Fund Investor | International Growth vs. Income Growth Fund |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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