Correlation Between International Equities and Stock Index
Can any of the company-specific risk be diversified away by investing in both International Equities and Stock Index 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 Stock Index 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 Stock Index Fund, you can compare the effects of market volatilities on International Equities and Stock Index 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 Stock Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Equities and Stock Index.
Diversification Opportunities for International Equities and Stock Index
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between International and Stock is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding International Equities Index and Stock Index Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stock Index Fund 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 Stock Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stock Index Fund has no effect on the direction of International Equities i.e., International Equities and Stock Index go up and down completely randomly.
Pair Corralation between International Equities and Stock Index
Assuming the 90 days horizon International Equities Index is expected to under-perform the Stock Index. In addition to that, International Equities is 1.01 times more volatile than Stock Index Fund. It trades about -0.14 of its total potential returns per unit of risk. Stock Index Fund is currently generating about 0.15 per unit of volatility. If you would invest 5,890 in Stock Index Fund on August 30, 2024 and sell it today you would earn a total of 174.00 from holding Stock Index Fund or generate 2.95% 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. Stock Index Fund
Performance |
| Timeline |
| International Equities |
| Stock Index Fund |
International Equities and Stock Index Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Equities and Stock Index
The main advantage of trading using opposite International Equities and Stock Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Equities position performs unexpectedly, Stock Index 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 Stock Index will offset losses from the drop in Stock Index'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 |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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