Correlation Between Active International and Small Pany

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

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

Diversification Opportunities for Active International and Small Pany

-0.64

Correlation Coefficient

Active International  Small Pany

Excellent diversification

The 3 months correlation between Active and Small is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Active International Allocatio and Small Pany Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Pany Growth and Active International 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 Active International Allocation are associated (or correlated) with Small Pany. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Pany Growth has no effect on the direction of Active International i.e., Active International and Small Pany go up and down completely randomly.

Pair Corralation between Active International and Small Pany

Assuming the 90 days horizon Active International Allocation is expected to generate 0.27 times more return on investment than Small Pany. However, Active International Allocation is 3.77 times less risky than Small Pany. It trades about 0.17 of its potential returns per unit of risk. Small Pany Growth is currently generating about 0.02 per unit of risk. If you would invest  1,566  in Active International Allocation on October 23, 2024 and sell it today you would earn a total of  23.00  from holding Active International Allocation or generate 1.47% return on investment over 90 days.

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

Active International Allocatio  vs.  Small Pany Growth

Active International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Small Pany Growth

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Small Pany Growth are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Small Pany showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Active International and Small Pany

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

The idea behind Active International Allocation and Small Pany Growth 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.