Correlation Between International Fund and Extended Market
Can any of the company-specific risk be diversified away by investing in both International Fund and Extended Market 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 Extended Market 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 Extended Market Index, you can compare the effects of market volatilities on International Fund and Extended Market 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 Extended Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Fund and Extended Market.
Diversification Opportunities for International Fund and Extended Market
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between International and Extended is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding International Fund Internation and Extended Market Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extended Market Index 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 Extended Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extended Market Index has no effect on the direction of International Fund i.e., International Fund and Extended Market go up and down completely randomly.
Pair Corralation between International Fund and Extended Market
Assuming the 90 days horizon International Fund International is expected to generate 0.66 times more return on investment than Extended Market. However, International Fund International is 1.52 times less risky than Extended Market. It trades about 0.05 of its potential returns per unit of risk. Extended Market Index is currently generating about 0.03 per unit of risk. If you would invest 2,290 in International Fund International on November 2, 2024 and sell it today you would earn a total of 424.00 from holding International Fund International or generate 18.52% 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. Extended Market Index
Performance |
| Timeline |
| International Fund |
| Extended Market Index |
International Fund and Extended Market Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Fund and Extended Market
The main advantage of trading using opposite International Fund and Extended Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Fund position performs unexpectedly, Extended Market 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 Extended Market will offset losses from the drop in Extended Market's long position.| International Fund vs. One Choice Portfolio | International Fund vs. Needham Aggressive Growth | International Fund vs. Aqr Risk Parity | International Fund vs. Siit High Yield |
| Extended Market vs. Franklin Low Duration | Extended Market vs. Mndvux | Extended Market vs. Voya Global Equity | Extended Market vs. Legg Mason Bw |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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