Correlation Between Aggressive Balanced and International Equity
Can any of the company-specific risk be diversified away by investing in both Aggressive Balanced 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 Aggressive Balanced and International Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aggressive Balanced Allocation and International Equity Portfolio, you can compare the effects of market volatilities on Aggressive Balanced 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 Aggressive Balanced with a short position of International Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aggressive Balanced and International Equity.
Diversification Opportunities for Aggressive Balanced and International Equity
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Aggressive and International is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Aggressive Balanced Allocation and International Equity Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Equity and Aggressive Balanced 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 Aggressive Balanced Allocation 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 Aggressive Balanced i.e., Aggressive Balanced and International Equity go up and down completely randomly.
Pair Corralation between Aggressive Balanced and International Equity
Assuming the 90 days horizon Aggressive Balanced Allocation is expected to under-perform the International Equity. But the mutual fund apears to be less risky and, when comparing its historical volatility, Aggressive Balanced Allocation is 1.24 times less risky than International Equity. The mutual fund trades about -0.31 of its potential returns per unit of risk. The International Equity Portfolio is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 1,186 in International Equity Portfolio on December 1, 2024 and sell it today you would earn a total of 39.00 from holding International Equity Portfolio or generate 3.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aggressive Balanced Allocation vs. International Equity Portfolio
Performance |
| Timeline |
| Aggressive Balanced |
| International Equity |
Aggressive Balanced and International Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aggressive Balanced and International Equity
The main advantage of trading using opposite Aggressive Balanced and International Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aggressive Balanced 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.| Aggressive Balanced vs. Ab Bond Inflation | Aggressive Balanced vs. Calvert Bond Portfolio | Aggressive Balanced vs. Ab Bond Inflation | Aggressive Balanced vs. Ab Bond Inflation |
| International Equity vs. T Rowe Price | International Equity vs. Ft 7934 Corporate | International Equity vs. Buffalo High Yield | International Equity vs. Scharf Global Opportunity |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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