Correlation Between Conservative Balanced and International Investors

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

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

Diversification Opportunities for Conservative Balanced and International Investors

-0.06

Correlation Coefficient

Conservative Balanced  International Investors

Good diversification

The 3 months correlation between Conservative and International is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Conservative Balanced Allocati and International Investors Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Investors and Conservative Balanced 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 Conservative Balanced Allocation are associated (or correlated) with International Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Investors has no effect on the direction of Conservative Balanced i.e., Conservative Balanced and International Investors go up and down completely randomly.

Pair Corralation between Conservative Balanced and International Investors

Assuming the 90 days horizon Conservative Balanced Allocation is expected to under-perform the International Investors. But the mutual fund apears to be less risky and, when comparing its historical volatility, Conservative Balanced Allocation is 3.57 times less risky than International Investors. The mutual fund trades about -0.02 of its potential returns per unit of risk. The International Investors Gold is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  844.00  in International Investors Gold on December 25, 2024 and sell it today you would earn a total of  242.00  from holding International Investors Gold or generate 28.67% return on investment over 90 days.

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

Conservative Balanced Allocati  vs.  International Investors Gold

Conservative Balanced

Risk-Adjusted Performance

Very Weak

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

International Investors

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in International Investors Gold are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, International Investors showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Conservative Balanced and International Investors

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

The idea behind Conservative Balanced Allocation and International Investors Gold 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.