Correlation Between International Equities and Growth Fund
Can any of the company-specific risk be diversified away by investing in both International Equities and Growth 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 Equities and Growth Fund 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 Growth Fund Growth, you can compare the effects of market volatilities on International Equities and Growth 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 Equities with a short position of Growth Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Equities and Growth Fund.
Diversification Opportunities for International Equities and Growth Fund
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between International and Growth is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding International Equities Index and Growth Fund Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Fund Growth 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 Growth Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Fund Growth has no effect on the direction of International Equities i.e., International Equities and Growth Fund go up and down completely randomly.
Pair Corralation between International Equities and Growth Fund
Assuming the 90 days horizon International Equities Index is expected to under-perform the Growth Fund. But the mutual fund apears to be less risky and, when comparing its historical volatility, International Equities Index is 1.42 times less risky than Growth Fund. The mutual fund trades about -0.17 of its potential returns per unit of risk. The Growth Fund Growth is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,670 in Growth Fund Growth on August 27, 2024 and sell it today you would earn a total of 42.00 from holding Growth Fund Growth or generate 2.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Equities Index vs. Growth Fund Growth
Performance |
| Timeline |
| International Equities |
| Growth Fund Growth |
International Equities and Growth Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Equities and Growth Fund
The main advantage of trading using opposite International Equities and Growth Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Equities position performs unexpectedly, Growth 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 Growth Fund will offset losses from the drop in Growth Fund's long position.| International Equities vs. Mid Cap Index | International Equities vs. Mid Cap Strategic | International Equities vs. Valic Company I | International Equities vs. Valic Company I |
| Growth Fund vs. Mid Cap Index | Growth Fund vs. Mid Cap Strategic | Growth Fund vs. Valic Company I | Growth Fund vs. Stock Index 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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