Correlation Between International Stock and Dynamic Total

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

By analyzing existing cross correlation between International Stock Fund and Dynamic Total Return, you can compare the effects of market volatilities on International Stock and Dynamic Total 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 Stock with a short position of Dynamic Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Stock and Dynamic Total.

Diversification Opportunities for International Stock and Dynamic Total

0.65

Correlation Coefficient

International Stock  Dynamic Total

Poor diversification

The 3 months correlation between International and Dynamic is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding International Stock Fund and Dynamic Total Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynamic Total Return and International Stock 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 Stock Fund are associated (or correlated) with Dynamic Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynamic Total Return has no effect on the direction of International Stock i.e., International Stock and Dynamic Total go up and down completely randomly.

Pair Corralation between International Stock and Dynamic Total

Assuming the 90 days horizon International Stock Fund is expected to under-perform the Dynamic Total. In addition to that, International Stock is 3.34 times more volatile than Dynamic Total Return. It trades about -0.05 of its total potential returns per unit of risk. Dynamic Total Return is currently generating about -0.04 per unit of volatility. If you would invest  1,444  in Dynamic Total Return on December 1, 2024 and sell it today you would lose (10.00) from holding Dynamic Total Return or give up 0.69% of portfolio value over 90 days.

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

International Stock Fund  vs.  Dynamic Total Return

International Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days International Stock Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, International Stock is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dynamic Total Return

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dynamic Total Return has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Dynamic Total is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with International Stock and Dynamic Total

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

The idea behind International Stock Fund and Dynamic Total Return 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..