Correlation Between Growth Income and International Equities
Can any of the company-specific risk be diversified away by investing in both Growth Income and International Equities 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 Growth Income and International Equities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Income Fund and International Equities Index, you can compare the effects of market volatilities on Growth Income and International Equities 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 Growth Income with a short position of International Equities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Income and International Equities.
Diversification Opportunities for Growth Income and International Equities
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Growth and International is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Growth Income Fund and International Equities Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Equities and Growth Income 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 Growth Income Fund are associated (or correlated) with International Equities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Equities has no effect on the direction of Growth Income i.e., Growth Income and International Equities go up and down completely randomly.
Pair Corralation between Growth Income and International Equities
Assuming the 90 days horizon Growth Income Fund is expected to generate 1.02 times more return on investment than International Equities. However, Growth Income is 1.02 times more volatile than International Equities Index. It trades about 0.22 of its potential returns per unit of risk. International Equities Index is currently generating about -0.12 per unit of risk. If you would invest 3,346 in Growth Income Fund on August 31, 2024 and sell it today you would earn a total of 143.00 from holding Growth Income Fund or generate 4.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Income Fund vs. International Equities Index
Performance |
| Timeline |
| Growth Income |
| International Equities |
Growth Income and International Equities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Income and International Equities
The main advantage of trading using opposite Growth Income and International Equities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Income position performs unexpectedly, International Equities 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 Equities will offset losses from the drop in International Equities' long position.| Growth Income vs. Strategic Allocation Aggressive | Growth Income vs. Legg Mason Partners | Growth Income vs. Morningstar Aggressive Growth | Growth Income vs. Alliancebernstein Global High |
| International Equities vs. Artisan Small Cap | International Equities vs. Ab Small Cap | International Equities vs. Growth Opportunities Fund | International Equities vs. Touchstone Small Cap |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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