Correlation Between International Developed and Growth Strategy
Can any of the company-specific risk be diversified away by investing in both International Developed and Growth Strategy 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 Developed and Growth Strategy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Developed Markets and Growth Strategy Fund, you can compare the effects of market volatilities on International Developed and Growth Strategy 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 Developed with a short position of Growth Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Developed and Growth Strategy.
Diversification Opportunities for International Developed and Growth Strategy
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between International and GROWTH is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding International Developed Market and Growth Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Strategy and International Developed 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 Developed Markets are associated (or correlated) with Growth Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Strategy has no effect on the direction of International Developed i.e., International Developed and Growth Strategy go up and down completely randomly.
Pair Corralation between International Developed and Growth Strategy
Assuming the 90 days horizon International Developed Markets is expected to under-perform the Growth Strategy. In addition to that, International Developed is 1.55 times more volatile than Growth Strategy Fund. It trades about -0.02 of its total potential returns per unit of risk. Growth Strategy Fund is currently generating about 0.33 per unit of volatility. If you would invest 1,300 in Growth Strategy Fund on September 3, 2024 and sell it today you would earn a total of 44.00 from holding Growth Strategy Fund or generate 3.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Developed Market vs. Growth Strategy Fund
Performance |
| Timeline |
| International Developed |
| Growth Strategy |
International Developed and Growth Strategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Developed and Growth Strategy
The main advantage of trading using opposite International Developed and Growth Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Developed position performs unexpectedly, Growth Strategy 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 Growth Strategy will offset losses from the drop in Growth Strategy's long position.The idea behind International Developed Markets and Growth Strategy Fund 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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