Correlation Between Rmb International and Rmb Small
Can any of the company-specific risk be diversified away by investing in both Rmb International and Rmb Small 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 Rmb International and Rmb Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rmb International Fund and Rmb Small Cap, you can compare the effects of market volatilities on Rmb International and Rmb Small 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 Rmb International with a short position of Rmb Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rmb International and Rmb Small.
Diversification Opportunities for Rmb International and Rmb Small
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Rmb and Rmb is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Rmb International Fund and Rmb Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rmb Small Cap and Rmb International 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 Rmb International Fund are associated (or correlated) with Rmb Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rmb Small Cap has no effect on the direction of Rmb International i.e., Rmb International and Rmb Small go up and down completely randomly.
Pair Corralation between Rmb International and Rmb Small
Assuming the 90 days horizon Rmb International is expected to generate 2.41 times less return on investment than Rmb Small. But when comparing it to its historical volatility, Rmb International Fund is 1.49 times less risky than Rmb Small. It trades about 0.03 of its potential returns per unit of risk. Rmb Small Cap is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,403 in Rmb Small Cap on August 29, 2024 and sell it today you would earn a total of 472.00 from holding Rmb Small Cap or generate 33.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rmb International Fund vs. Rmb Small Cap
Performance |
| Timeline |
| Rmb International |
| Rmb Small Cap |
Rmb International and Rmb Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rmb International and Rmb Small
The main advantage of trading using opposite Rmb International and Rmb Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rmb International position performs unexpectedly, Rmb Small 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 Rmb Small will offset losses from the drop in Rmb Small's long position.| Rmb International vs. Gmo Resources | Rmb International vs. Goldman Sachs Mlp | Rmb International vs. Oil Gas Ultrasector | Rmb International vs. Guinness Atkinson Alternative |
| Rmb Small vs. Dunham High Yield | Rmb Small vs. Blackrock High Yield | Rmb Small vs. Pace High Yield | Rmb Small vs. Pace High Yield |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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