Correlation Between International Growth and Equity Income
Can any of the company-specific risk be diversified away by investing in both International Growth and Equity Income 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 Growth and Equity Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Growth Fund and Equity Income Fund, you can compare the effects of market volatilities on International Growth and Equity Income 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 Growth with a short position of Equity Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Growth and Equity Income.
Diversification Opportunities for International Growth and Equity Income
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between International and Equity is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding International Growth Fund and Equity Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Income and International Growth 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 Growth Fund are associated (or correlated) with Equity Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Income has no effect on the direction of International Growth i.e., International Growth and Equity Income go up and down completely randomly.
Pair Corralation between International Growth and Equity Income
Assuming the 90 days horizon International Growth Fund is expected to generate 1.44 times more return on investment than Equity Income. However, International Growth is 1.44 times more volatile than Equity Income Fund. It trades about 0.03 of its potential returns per unit of risk. Equity Income Fund is currently generating about 0.03 per unit of risk. If you would invest 1,105 in International Growth Fund on August 30, 2024 and sell it today you would earn a total of 160.00 from holding International Growth Fund or generate 14.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Growth Fund vs. Equity Income Fund
Performance |
| Timeline |
| International Growth |
| Equity Income |
International Growth and Equity Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Growth and Equity Income
The main advantage of trading using opposite International Growth and Equity Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Growth position performs unexpectedly, Equity Income 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 Equity Income will offset losses from the drop in Equity Income's long position.| International Growth vs. Europacific Growth Fund | International Growth vs. Europacific Growth Fund | International Growth vs. Europacific Growth Fund | International Growth vs. Europacific Growth Fund |
| Equity Income vs. Fidelity Managed Retirement | Equity Income vs. Moderately Aggressive Balanced | Equity Income vs. Pro Blend Moderate Term | Equity Income vs. Jp Morgan Smartretirement |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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