Correlation Between International Fixed and International Equity
Can any of the company-specific risk be diversified away by investing in both International Fixed 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 International Fixed and International Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Fixed Income and International Equity Fund, you can compare the effects of market volatilities on International Fixed 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 International Fixed with a short position of International Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Fixed and International Equity.
Diversification Opportunities for International Fixed and International Equity
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between International and International is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding International Fixed Income and International Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Equity and International Fixed 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 Fixed Income 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 International Fixed i.e., International Fixed and International Equity go up and down completely randomly.
Pair Corralation between International Fixed and International Equity
Assuming the 90 days horizon International Fixed is expected to generate 8.0 times less return on investment than International Equity. But when comparing it to its historical volatility, International Fixed Income is 3.45 times less risky than International Equity. It trades about 0.13 of its potential returns per unit of risk. International Equity Fund is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 1,305 in International Equity Fund on November 4, 2024 and sell it today you would earn a total of 63.00 from holding International Equity Fund or generate 4.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Fixed Income vs. International Equity Fund
Performance |
| Timeline |
| International Fixed |
| International Equity |
International Fixed and International Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Fixed and International Equity
The main advantage of trading using opposite International Fixed and International Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Fixed 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.| International Fixed vs. Balanced Strategy Fund | International Fixed vs. Eagle Mlp Strategy | International Fixed vs. Nasdaq 100 2x Strategy | International Fixed vs. Western Assets Emerging |
| International Equity vs. Lgm Risk Managed | International Equity vs. Barings High Yield | International Equity vs. Ironclad Managed Risk | International Equity vs. Artisan High Income |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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