Correlation Between International Equity and Advent Claymore
Can any of the company-specific risk be diversified away by investing in both International Equity and Advent Claymore 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 Equity and Advent Claymore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Equity Portfolio and Advent Claymore Convertible, you can compare the effects of market volatilities on International Equity and Advent Claymore 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 Equity with a short position of Advent Claymore. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Equity and Advent Claymore.
Diversification Opportunities for International Equity and Advent Claymore
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between International and Advent is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding International Equity Portfolio and Advent Claymore Convertible in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advent Claymore Conv and International Equity 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 Equity Portfolio are associated (or correlated) with Advent Claymore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advent Claymore Conv has no effect on the direction of International Equity i.e., International Equity and Advent Claymore go up and down completely randomly.
Pair Corralation between International Equity and Advent Claymore
Assuming the 90 days horizon International Equity is expected to generate 2.33 times less return on investment than Advent Claymore. In addition to that, International Equity is 1.02 times more volatile than Advent Claymore Convertible. It trades about 0.22 of its total potential returns per unit of risk. Advent Claymore Convertible is currently generating about 0.53 per unit of volatility. If you would invest 1,174 in Advent Claymore Convertible on September 13, 2024 and sell it today you would earn a total of 76.00 from holding Advent Claymore Convertible or generate 6.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Equity Portfolio vs. Advent Claymore Convertible
Performance |
| Timeline |
| International Equity |
| Advent Claymore Conv |
International Equity and Advent Claymore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Equity and Advent Claymore
The main advantage of trading using opposite International Equity and Advent Claymore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Equity position performs unexpectedly, Advent Claymore 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 Advent Claymore will offset losses from the drop in Advent Claymore's long position.The idea behind International Equity Portfolio and Advent Claymore Convertible 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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