Correlation Between Avantis Short and Avantis International

Can any of the company-specific risk be diversified away by investing in both Avantis Short and Avantis International 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 Avantis Short and Avantis International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Avantis Short Term Fixed and Avantis International Small, you can compare the effects of market volatilities on Avantis Short and Avantis International 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 Avantis Short with a short position of Avantis International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avantis Short and Avantis International.

Diversification Opportunities for Avantis Short and Avantis International

0.67

Correlation Coefficient

Avantis Short  Avantis International

Poor diversification

The 3 months correlation between Avantis and Avantis is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Short Term Fixed and Avantis International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis International and Avantis Short 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 Avantis Short Term Fixed are associated (or correlated) with Avantis International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis International has no effect on the direction of Avantis Short i.e., Avantis Short and Avantis International go up and down completely randomly.

Pair Corralation between Avantis Short and Avantis International

Assuming the 90 days horizon Avantis Short Term Fixed is expected to under-perform the Avantis International. But the mutual fund apears to be less risky and, when comparing its historical volatility, Avantis Short Term Fixed is 6.38 times less risky than Avantis International. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Avantis International Small is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,293  in Avantis International Small on September 4, 2024 and sell it today you would earn a total of  17.00  from holding Avantis International Small or generate 1.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Avantis Short Term Fixed  vs.  Avantis International Small

Avantis Short Term

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avantis Short Term Fixed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Avantis Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Avantis International

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis International Small are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Avantis International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Avantis Short and Avantis International

The main advantage of trading using opposite Avantis Short and Avantis International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avantis Short position performs unexpectedly, Avantis International 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 Avantis International will offset losses from the drop in Avantis International's long position.

The idea behind Avantis Short Term Fixed and Avantis International Small pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Correlations module to find global opportunities by holding instruments from different markets.