Correlation Between International Portfolio and Strategic Equity

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

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

Diversification Opportunities for International Portfolio and Strategic Equity

-0.73

Correlation Coefficient

International Portfolio  Strategic Equity

Pay attention - limited upside

The 3 months correlation between International and Strategic is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding International Portfolio Intern and Strategic Equity Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Equity Por and International 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 International Portfolio International are associated (or correlated) with Strategic Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Equity Por has no effect on the direction of International Portfolio i.e., International Portfolio and Strategic Equity go up and down completely randomly.

Pair Corralation between International Portfolio and Strategic Equity

Assuming the 90 days horizon International Portfolio International is expected to under-perform the Strategic Equity. But the mutual fund apears to be less risky and, when comparing its historical volatility, International Portfolio International is 1.05 times less risky than Strategic Equity. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Strategic Equity Portfolio is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,920  in Strategic Equity Portfolio on September 3, 2024 and sell it today you would earn a total of  239.00  from holding Strategic Equity Portfolio or generate 8.18% return on investment over 90 days.

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

International Portfolio Intern  vs.  Strategic Equity Portfolio

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 fairly strong forward indicators, International Portfolio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Strategic Equity Por

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Equity Portfolio are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Strategic Equity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with International Portfolio and Strategic Equity

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

The idea behind International Portfolio International and Strategic Equity Portfolio 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.

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 Transaction History module to view history of all your transactions and understand their impact on performance.