Correlation Between International Growth and Inflation Adjusted
Can any of the company-specific risk be diversified away by investing in both International Growth and Inflation Adjusted 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 Inflation Adjusted 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 Inflation Adjusted Bond Fund, you can compare the effects of market volatilities on International Growth and Inflation Adjusted 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 Inflation Adjusted. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Growth and Inflation Adjusted.
Diversification Opportunities for International Growth and Inflation Adjusted
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between International and Inflation is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding International Growth Fund and Inflation Adjusted Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inflation Adjusted Bond 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 Inflation Adjusted. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inflation Adjusted Bond has no effect on the direction of International Growth i.e., International Growth and Inflation Adjusted go up and down completely randomly.
Pair Corralation between International Growth and Inflation Adjusted
Assuming the 90 days horizon International Growth Fund is expected to generate 1.45 times more return on investment than Inflation Adjusted. However, International Growth is 1.45 times more volatile than Inflation Adjusted Bond Fund. It trades about 0.21 of its potential returns per unit of risk. Inflation Adjusted Bond Fund is currently generating about -0.17 per unit of risk. If you would invest 1,243 in International Growth Fund on September 19, 2024 and sell it today you would earn a total of 34.00 from holding International Growth Fund or generate 2.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Growth Fund vs. Inflation Adjusted Bond Fund
Performance |
| Timeline |
| International Growth |
| Inflation Adjusted Bond |
International Growth and Inflation Adjusted Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Growth and Inflation Adjusted
The main advantage of trading using opposite International Growth and Inflation Adjusted positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Growth position performs unexpectedly, Inflation Adjusted 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 Inflation Adjusted will offset losses from the drop in Inflation Adjusted's long position.| International Growth vs. Value Fund Investor | International Growth vs. Ultra Fund Investor | International Growth vs. Growth Fund Investor | International Growth vs. Income Growth Fund |
| Inflation Adjusted vs. Mid Cap Value | Inflation Adjusted vs. Equity Growth Fund | Inflation Adjusted vs. Income Growth Fund | Inflation Adjusted vs. Diversified Bond Fund |
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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