Correlation Between Us Lg and Asia Pacific
Can any of the company-specific risk be diversified away by investing in both Us Lg and Asia Pacific 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 Us Lg and Asia Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Us Lg Cap and Asia Pacific Small, you can compare the effects of market volatilities on Us Lg and Asia Pacific 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 Us Lg with a short position of Asia Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Lg and Asia Pacific.
Diversification Opportunities for Us Lg and Asia Pacific
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between DUSQX and Asia is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Us Lg Cap and Asia Pacific Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Pacific Small and Us Lg 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 Us Lg Cap are associated (or correlated) with Asia Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Pacific Small has no effect on the direction of Us Lg i.e., Us Lg and Asia Pacific go up and down completely randomly.
Pair Corralation between Us Lg and Asia Pacific
Assuming the 90 days horizon Us Lg Cap is expected to generate 0.6 times more return on investment than Asia Pacific. However, Us Lg Cap is 1.66 times less risky than Asia Pacific. It trades about -0.09 of its potential returns per unit of risk. Asia Pacific Small is currently generating about -0.33 per unit of risk. If you would invest 3,315 in Us Lg Cap on September 22, 2024 and sell it today you would lose (53.00) from holding Us Lg Cap or give up 1.6% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 95.45% |
Values | Daily Returns |
Us Lg Cap vs. Asia Pacific Small
Performance |
Timeline |
Us Lg Cap |
Asia Pacific Small |
Us Lg and Asia Pacific Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Us Lg and Asia Pacific
The main advantage of trading using opposite Us Lg and Asia Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Lg position performs unexpectedly, Asia Pacific 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 Asia Pacific will offset losses from the drop in Asia Pacific's long position.Us Lg vs. Intal High Relative | Us Lg vs. Dfa Investment Grade | Us Lg vs. Emerging Markets E | Us Lg vs. Us E Equity |
Asia Pacific vs. Intal High Relative | Asia Pacific vs. Dfa International | Asia Pacific vs. Dfa Inflation Protected | Asia Pacific vs. Dfa International Small |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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