Correlation Between Longshort Portfolio and International Portfolio

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

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

Diversification Opportunities for Longshort Portfolio and International Portfolio

0.62

Correlation Coefficient

Longshort Portfolio  International Portfolio

Poor diversification

The 3 months correlation between Longshort and International is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Longshort Portfolio Longshort and International Portfolio Intern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Portfolio and Longshort Portfolio 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 Longshort Portfolio Longshort are associated (or correlated) with International Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Portfolio has no effect on the direction of Longshort Portfolio i.e., Longshort Portfolio and International Portfolio go up and down completely randomly.

Pair Corralation between Longshort Portfolio and International Portfolio

Assuming the 90 days horizon Longshort Portfolio is expected to generate 1.65 times less return on investment than International Portfolio. But when comparing it to its historical volatility, Longshort Portfolio Longshort is 1.39 times less risky than International Portfolio. It trades about 0.04 of its potential returns per unit of risk. International Portfolio International is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,327  in International Portfolio International on October 7, 2024 and sell it today you would earn a total of  212.00  from holding International Portfolio International or generate 15.98% return on investment over 90 days.

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

Longshort Portfolio Longshort  vs.  International Portfolio Intern

Longshort Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

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

International Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Portfolio International has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Longshort Portfolio and International Portfolio

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

The idea behind Longshort Portfolio Longshort and International Portfolio International 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.