Correlation Between Select International and Us Defensive
Can any of the company-specific risk be diversified away by investing in both Select International and Us Defensive 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 Select International and Us Defensive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Select International Equity and Us Defensive Equity, you can compare the effects of market volatilities on Select International and Us Defensive 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 Select International with a short position of Us Defensive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select International and Us Defensive.
Diversification Opportunities for Select International and Us Defensive
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Select and REUYX is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Select International Equity and Us Defensive Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Defensive Equity and Select 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 Select International Equity are associated (or correlated) with Us Defensive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Defensive Equity has no effect on the direction of Select International i.e., Select International and Us Defensive go up and down completely randomly.
Pair Corralation between Select International and Us Defensive
Assuming the 90 days horizon Select International Equity is expected to under-perform the Us Defensive. In addition to that, Select International is 1.09 times more volatile than Us Defensive Equity. It trades about -0.02 of its total potential returns per unit of risk. Us Defensive Equity is currently generating about 0.33 per unit of volatility. If you would invest 4,952 in Us Defensive Equity on September 1, 2024 and sell it today you would earn a total of 253.00 from holding Us Defensive Equity or generate 5.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Select International Equity vs. Us Defensive Equity
Performance |
| Timeline |
| Select International |
| Us Defensive Equity |
Select International and Us Defensive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Select International and Us Defensive
The main advantage of trading using opposite Select International and Us Defensive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select International position performs unexpectedly, Us Defensive 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 Us Defensive will offset losses from the drop in Us Defensive's long position.| Select International vs. International Developed Markets | Select International vs. Global Real Estate | Select International vs. Global Real Estate | Select International vs. Global Real Estate |
| Us Defensive vs. International Developed Markets | Us Defensive vs. Global Real Estate | Us Defensive vs. Global Real Estate | Us Defensive 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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