Correlation Between International Strategic and Ab International
Can any of the company-specific risk be diversified away by investing in both International Strategic and Ab International 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 Strategic and Ab International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Strategic Equities and Ab International Value, you can compare the effects of market volatilities on International Strategic and Ab International 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 Strategic with a short position of Ab International. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Strategic and Ab International.
Diversification Opportunities for International Strategic and Ab International
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between International and ABICX is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding International Strategic Equiti and Ab International Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab International Value and International Strategic 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 Strategic Equities are associated (or correlated) with Ab International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab International Value has no effect on the direction of International Strategic i.e., International Strategic and Ab International go up and down completely randomly.
Pair Corralation between International Strategic and Ab International
Assuming the 90 days horizon International Strategic Equities is expected to generate 0.42 times more return on investment than Ab International. However, International Strategic Equities is 2.35 times less risky than Ab International. It trades about -0.04 of its potential returns per unit of risk. Ab International Value is currently generating about -0.14 per unit of risk. If you would invest 1,315 in International Strategic Equities on September 1, 2024 and sell it today you would lose (8.00) from holding International Strategic Equities or give up 0.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Strategic Equiti vs. Ab International Value
Performance |
| Timeline |
| International Strategic |
| Ab International Value |
International Strategic and Ab International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Strategic and Ab International
The main advantage of trading using opposite International Strategic and Ab International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Strategic position performs unexpectedly, Ab International 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 Ab International will offset losses from the drop in Ab International's long position.The idea behind International Strategic Equities and Ab International Value 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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