Correlation Between International Investors and Total Return

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

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

Diversification Opportunities for International Investors and Total Return

0.34

Correlation Coefficient

International Investors  Total Return

Weak diversification

The 3 months correlation between International and Total is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding International Investors Gold and Total Return Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Return Bond and International Investors 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 Investors Gold are associated (or correlated) with Total Return. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Return Bond has no effect on the direction of International Investors i.e., International Investors and Total Return go up and down completely randomly.

Pair Corralation between International Investors and Total Return

Assuming the 90 days horizon International Investors Gold is expected to under-perform the Total Return. In addition to that, International Investors is 9.98 times more volatile than Total Return Bond. It trades about -0.21 of its total potential returns per unit of risk. Total Return Bond is currently generating about -0.3 per unit of volatility. If you would invest  1,108  in Total Return Bond on September 26, 2024 and sell it today you would lose (19.00) from holding Total Return Bond or give up 1.71% of portfolio value over 90 days.

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

International Investors Gold  vs.  Total Return Bond

International Investors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Investors Gold has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Total Return Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Total Return Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Total Return 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 Investors and Total Return

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

The idea behind International Investors Gold and Total Return Bond 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.