Correlation Between International Equity and International Stock
Can any of the company-specific risk be diversified away by investing in both International Equity and International Stock 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 International Stock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Equity Series and International Stock Fund, you can compare the effects of market volatilities on International Equity and International Stock 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 International Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Equity and International Stock.
Diversification Opportunities for International Equity and International Stock
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between International and International is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding International Equity Series and International Stock Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Stock 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 Series are associated (or correlated) with International Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Stock has no effect on the direction of International Equity i.e., International Equity and International Stock go up and down completely randomly.
Pair Corralation between International Equity and International Stock
Assuming the 90 days horizon International Equity Series is expected to generate 1.02 times more return on investment than International Stock. However, International Equity is 1.02 times more volatile than International Stock Fund. It trades about 0.06 of its potential returns per unit of risk. International Stock Fund is currently generating about 0.03 per unit of risk. If you would invest 992.00 in International Equity Series on August 29, 2024 and sell it today you would earn a total of 249.00 from holding International Equity Series or generate 25.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Equity Series vs. International Stock Fund
Performance |
| Timeline |
| International Equity |
| International Stock |
International Equity and International Stock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Equity and International Stock
The main advantage of trading using opposite International Equity and International Stock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Equity position performs unexpectedly, International Stock 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 Stock will offset losses from the drop in International Stock's long position.| International Equity vs. Foreign Smaller Panies | International Equity vs. International Equity Series | International Equity vs. T Rowe Price | International Equity vs. Franklin Growth Allocation |
| International Stock vs. Washington Mutual Investors | International Stock vs. Pace Large Growth | International Stock vs. Tax Managed Large Cap | International Stock vs. Upright Assets Allocation |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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