Correlation Between International Government and Asset Allocation
Can any of the company-specific risk be diversified away by investing in both International Government and Asset Allocation 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 Government and Asset Allocation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Government Bond and Asset Allocation Fund, you can compare the effects of market volatilities on International Government and Asset Allocation 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 Government with a short position of Asset Allocation. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Government and Asset Allocation.
Diversification Opportunities for International Government and Asset Allocation
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between International and Asset is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding International Government Bond and Asset Allocation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asset Allocation and International Government 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 Government Bond are associated (or correlated) with Asset Allocation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asset Allocation has no effect on the direction of International Government i.e., International Government and Asset Allocation go up and down completely randomly.
Pair Corralation between International Government and Asset Allocation
Assuming the 90 days horizon International Government Bond is expected to under-perform the Asset Allocation. But the mutual fund apears to be less risky and, when comparing its historical volatility, International Government Bond is 1.77 times less risky than Asset Allocation. The mutual fund trades about -0.17 of its potential returns per unit of risk. The Asset Allocation Fund is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,227 in Asset Allocation Fund on August 27, 2024 and sell it today you would earn a total of 13.00 from holding Asset Allocation Fund or generate 1.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Government Bond vs. Asset Allocation Fund
Performance |
| Timeline |
| International Government |
| Asset Allocation |
International Government and Asset Allocation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Government and Asset Allocation
The main advantage of trading using opposite International Government and Asset Allocation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Government position performs unexpectedly, Asset Allocation 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 Asset Allocation will offset losses from the drop in Asset Allocation's long position.| International Government vs. Mid Cap Index | International Government vs. Mid Cap Strategic | International Government vs. Valic Company I | International Government vs. Valic Company I |
| Asset Allocation vs. Mid Cap Index | Asset Allocation vs. Mid Cap Strategic | Asset Allocation vs. Valic Company I | Asset Allocation vs. Valic Company I |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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