Correlation Between Global Opportunity and International Value

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

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

Diversification Opportunities for Global Opportunity and International Value

0.5

Correlation Coefficient

Global Opportunity  International Value

Very weak diversification

The 3 months correlation between Global and International is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Global Opportunity Portfolio and International Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Value and Global Opportunity 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 Global Opportunity Portfolio are associated (or correlated) with International Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Value has no effect on the direction of Global Opportunity i.e., Global Opportunity and International Value go up and down completely randomly.

Pair Corralation between Global Opportunity and International Value

Assuming the 90 days horizon Global Opportunity Portfolio is expected to under-perform the International Value. In addition to that, Global Opportunity is 1.85 times more volatile than International Value Fund. It trades about -0.03 of its total potential returns per unit of risk. International Value Fund is currently generating about -0.02 per unit of volatility. If you would invest  879.00  in International Value Fund on October 26, 2024 and sell it today you would lose (9.00) from holding International Value Fund or give up 1.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Global Opportunity Portfolio  vs.  International Value Fund

Global Opportunity

Risk-Adjusted Performance

0 of 100

Very Weak

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

International Value

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Global Opportunity and International Value

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

The idea behind Global Opportunity Portfolio and International Value Fund 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.