Correlation Between Active International and Short Duration

Can any of the company-specific risk be diversified away by investing in both Active International and Short Duration 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 Short Duration 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 Short Duration Income, you can compare the effects of market volatilities on Active International and Short Duration 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 Short Duration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Active International and Short Duration.

Diversification Opportunities for Active International and Short Duration

0.0

Correlation Coefficient

Active International  Short Duration

Pay attention - limited upside

The 3 months correlation between Active and Short is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Active International Allocatio and Short Duration Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Duration Income 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 Short Duration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Duration Income has no effect on the direction of Active International i.e., Active International and Short Duration go up and down completely randomly.

Pair Corralation between Active International and Short Duration

If you would invest  1,555  in Active International Allocation on December 29, 2024 and sell it today you would earn a total of  169.00  from holding Active International Allocation or generate 10.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Active International Allocatio  vs.  Short Duration Income

Active International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Active International Allocation are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Active International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Short Duration Income

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Active International and Short Duration

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

The idea behind Active International Allocation and Short Duration Income 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.