Correlation Between International Equities and Versatile Bond
Can any of the company-specific risk be diversified away by investing in both International Equities and Versatile Bond 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 Equities and Versatile Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Equities Index and Versatile Bond Portfolio, you can compare the effects of market volatilities on International Equities and Versatile Bond 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 Equities with a short position of Versatile Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Equities and Versatile Bond.
Diversification Opportunities for International Equities and Versatile Bond
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between International and Versatile is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding International Equities Index and Versatile Bond Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Versatile Bond Portfolio and International Equities 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 Equities Index are associated (or correlated) with Versatile Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Versatile Bond Portfolio has no effect on the direction of International Equities i.e., International Equities and Versatile Bond go up and down completely randomly.
Pair Corralation between International Equities and Versatile Bond
Assuming the 90 days horizon International Equities Index is expected to generate 1.24 times more return on investment than Versatile Bond. However, International Equities is 1.24 times more volatile than Versatile Bond Portfolio. It trades about 0.05 of its potential returns per unit of risk. Versatile Bond Portfolio is currently generating about -0.21 per unit of risk. If you would invest 835.00 in International Equities Index on September 12, 2024 and sell it today you would earn a total of 6.00 from holding International Equities Index or generate 0.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
International Equities Index vs. Versatile Bond Portfolio
Performance |
| Timeline |
| International Equities |
| Versatile Bond Portfolio |
International Equities and Versatile Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Equities and Versatile Bond
The main advantage of trading using opposite International Equities and Versatile Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Equities position performs unexpectedly, Versatile Bond 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 Versatile Bond will offset losses from the drop in Versatile Bond's long position.| International Equities vs. Jhancock Disciplined Value | International Equities vs. Guidemark Large Cap | International Equities vs. Dodge Cox Stock | International Equities vs. T Rowe Price |
| Versatile Bond vs. Versatile Bond Portfolio | Versatile Bond vs. Prudential Jennison International | Versatile Bond vs. Fidelity New Markets | Versatile Bond vs. Ohio Variable College |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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