Correlation Between Salient Alternative and International Equity
Can any of the company-specific risk be diversified away by investing in both Salient Alternative and International Equity 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 Salient Alternative and International Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Salient Alternative Beta and International Equity Portfolio, you can compare the effects of market volatilities on Salient Alternative and International Equity 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 Salient Alternative with a short position of International Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salient Alternative and International Equity.
Diversification Opportunities for Salient Alternative and International Equity
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Salient and International is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Salient Alternative Beta and International Equity Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Equity and Salient Alternative 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 Salient Alternative Beta are associated (or correlated) with International Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Equity has no effect on the direction of Salient Alternative i.e., Salient Alternative and International Equity go up and down completely randomly.
Pair Corralation between Salient Alternative and International Equity
Assuming the 90 days horizon Salient Alternative is expected to generate 1.06 times less return on investment than International Equity. But when comparing it to its historical volatility, Salient Alternative Beta is 1.23 times less risky than International Equity. It trades about 0.05 of its potential returns per unit of risk. International Equity Portfolio is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 972.00 in International Equity Portfolio on September 3, 2024 and sell it today you would earn a total of 180.00 from holding International Equity Portfolio or generate 18.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Salient Alternative Beta vs. International Equity Portfolio
Performance |
| Timeline |
| Salient Alternative Beta |
| International Equity |
Salient Alternative and International Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Salient Alternative and International Equity
The main advantage of trading using opposite Salient Alternative and International Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salient Alternative position performs unexpectedly, International Equity 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 Equity will offset losses from the drop in International Equity's long position.The idea behind Salient Alternative Beta and International Equity Portfolio 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.| International Equity vs. Semiconductor Ultrasector Profund | International Equity vs. Growth Strategy Fund | International Equity vs. Nationwide Global Equity | International Equity vs. T Rowe Price |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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