Correlation Between International Fund and Income Fund
Can any of the company-specific risk be diversified away by investing in both International Fund and Income Fund 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 Fund and Income Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Fund International and Income Fund Income, you can compare the effects of market volatilities on International Fund and Income Fund 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 Fund with a short position of Income Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Fund and Income Fund.
Diversification Opportunities for International Fund and Income Fund
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between International and Income is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding International Fund Internation and Income Fund Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Income Fund Income and International Fund 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 Fund International are associated (or correlated) with Income Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Income Fund Income has no effect on the direction of International Fund i.e., International Fund and Income Fund go up and down completely randomly.
Pair Corralation between International Fund and Income Fund
Assuming the 90 days horizon International Fund International is expected to generate 2.21 times more return on investment than Income Fund. However, International Fund is 2.21 times more volatile than Income Fund Income. It trades about 0.05 of its potential returns per unit of risk. Income Fund Income is currently generating about 0.05 per unit of risk. If you would invest 2,342 in International Fund International on September 3, 2024 and sell it today you would earn a total of 468.00 from holding International Fund International or generate 19.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Fund Internation vs. Income Fund Income
Performance |
| Timeline |
| International Fund |
| Income Fund Income |
International Fund and Income Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Fund and Income Fund
The main advantage of trading using opposite International Fund and Income Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Fund position performs unexpectedly, Income Fund 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 Income Fund will offset losses from the drop in Income Fund's long position.The idea behind International Fund International and Income Fund Income 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.
| Income Fund vs. Metropolitan West Total | Income Fund vs. Metropolitan West Total | Income Fund vs. Pimco Total Return | Income Fund vs. Total Return 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
Other Complementary Tools
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio |