Correlation Between Catalyst/smh High and International Developed

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

By analyzing existing cross correlation between Catalystsmh High Income and International Developed Markets, you can compare the effects of market volatilities on Catalyst/smh High and International Developed 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 Catalyst/smh High with a short position of International Developed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Catalyst/smh High and International Developed.

Diversification Opportunities for Catalyst/smh High and International Developed

0.07

Correlation Coefficient

Catalyst/smh High  International Developed

Significant diversification

The 3 months correlation between Catalyst/smh and International is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Catalystsmh High Income and International Developed Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Developed and Catalyst/smh High 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 Catalystsmh High Income are associated (or correlated) with International Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Developed has no effect on the direction of Catalyst/smh High i.e., Catalyst/smh High and International Developed go up and down completely randomly.

Pair Corralation between Catalyst/smh High and International Developed

Assuming the 90 days horizon Catalystsmh High Income is expected to under-perform the International Developed. But the mutual fund apears to be less risky and, when comparing its historical volatility, Catalystsmh High Income is 2.22 times less risky than International Developed. The mutual fund trades about -0.02 of its potential returns per unit of risk. The International Developed Markets is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  4,129  in International Developed Markets on December 26, 2024 and sell it today you would earn a total of  380.00  from holding International Developed Markets or generate 9.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Catalystsmh High Income  vs.  International Developed Market

Catalystsmh High Income

Risk-Adjusted Performance

Weak

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

International Developed

Risk-Adjusted Performance

Good

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

Pair Trading with Catalyst/smh High and International Developed

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

The idea behind Catalystsmh High Income and International Developed Markets 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.