Correlation Between International Developed and Balanced Strategy
Can any of the company-specific risk be diversified away by investing in both International Developed and Balanced 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 Balanced 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 Balanced Strategy Fund, you can compare the effects of market volatilities on International Developed and Balanced 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 Balanced Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Developed and Balanced Strategy.
Diversification Opportunities for International Developed and Balanced Strategy
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between International and Balanced is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding International Developed Market and Balanced Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced 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 Balanced Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Strategy has no effect on the direction of International Developed i.e., International Developed and Balanced Strategy go up and down completely randomly.
Pair Corralation between International Developed and Balanced Strategy
Assuming the 90 days horizon International Developed is expected to generate 10.21 times less return on investment than Balanced Strategy. In addition to that, International Developed is 1.86 times more volatile than Balanced Strategy Fund. It trades about 0.02 of its total potential returns per unit of risk. Balanced Strategy Fund is currently generating about 0.33 per unit of volatility. If you would invest 1,019 in Balanced Strategy Fund on September 1, 2024 and sell it today you would earn a total of 30.00 from holding Balanced Strategy Fund or generate 2.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Developed Market vs. Balanced Strategy Fund
Performance |
| Timeline |
| International Developed |
| Balanced Strategy |
International Developed and Balanced Strategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Developed and Balanced Strategy
The main advantage of trading using opposite International Developed and Balanced Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Developed position performs unexpectedly, Balanced 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 Balanced Strategy will offset losses from the drop in Balanced Strategy's long position.The idea behind International Developed Markets and Balanced 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.
| Balanced Strategy vs. International Developed Markets | Balanced Strategy vs. Global Real Estate | Balanced Strategy vs. Global Real Estate | Balanced Strategy vs. Global Real Estate |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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