Correlation Between Avantis Equity and Avantis International

Can any of the company-specific risk be diversified away by investing in both Avantis Equity 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 Equity 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 Equity ETF and Avantis International Small, you can compare the effects of market volatilities on Avantis Equity 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 Equity with a short position of Avantis International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avantis Equity and Avantis International.

Diversification Opportunities for Avantis Equity and Avantis International

-0.31

Correlation Coefficient

Avantis Equity  Avantis International

Very good diversification

The 3 months correlation between Avantis and Avantis is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Equity ETF 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 Equity 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 Equity ETF 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 Equity i.e., Avantis Equity and Avantis International go up and down completely randomly.

Pair Corralation between Avantis Equity and Avantis International

Given the investment horizon of 90 days Avantis Equity ETF is expected to generate 1.1 times more return on investment than Avantis International. However, Avantis Equity is 1.1 times more volatile than Avantis International Small. It trades about 0.37 of its potential returns per unit of risk. Avantis International Small is currently generating about 0.06 per unit of risk. If you would invest  9,484  in Avantis Equity ETF on September 2, 2024 and sell it today you would earn a total of  690.00  from holding Avantis Equity ETF or generate 7.28% return on investment over 90 days.

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

Avantis Equity ETF  vs.  Avantis International Small

Avantis Equity ETF

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis Equity ETF are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Avantis Equity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Avantis International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avantis International Small has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Avantis International is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Avantis Equity and Avantis International

The main advantage of trading using opposite Avantis Equity and Avantis International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avantis Equity 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 Equity ETF 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.