Correlation Between International Equity and William Blair

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

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

Diversification Opportunities for International Equity and William Blair

-0.15

Correlation Coefficient

International Equity  William Blair

Good diversification

The 3 months correlation between International and William is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding International Equity Portfolio and William Blair Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on William Blair Small and International Equity 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 Equity Portfolio are associated (or correlated) with William Blair. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of William Blair Small has no effect on the direction of International Equity i.e., International Equity and William Blair go up and down completely randomly.

Pair Corralation between International Equity and William Blair

Assuming the 90 days horizon International Equity Portfolio is expected to generate 0.71 times more return on investment than William Blair. However, International Equity Portfolio is 1.42 times less risky than William Blair. It trades about 0.14 of its potential returns per unit of risk. William Blair Small is currently generating about -0.13 per unit of risk. If you would invest  1,026  in International Equity Portfolio on December 24, 2024 and sell it today you would earn a total of  81.00  from holding International Equity Portfolio or generate 7.89% return on investment over 90 days.

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

International Equity Portfolio  vs.  William Blair Small

International Equity

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in International Equity Portfolio are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental drivers, International Equity may actually be approaching a critical reversion point that can send shares even higher in April 2025.

William Blair Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days William Blair Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with International Equity and William Blair

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

The idea behind International Equity Portfolio and William Blair Small 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.