Correlation Between International Equity and Doubleline Yield

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

By analyzing existing cross correlation between International Equity Index and Doubleline Yield Opportunities, you can compare the effects of market volatilities on International Equity and Doubleline Yield 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 Doubleline Yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Equity and Doubleline Yield.

Diversification Opportunities for International Equity and Doubleline Yield

0.83

Correlation Coefficient

International Equity  Doubleline Yield

Very poor diversification

The 3 months correlation between International and Doubleline is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding International Equity Index and Doubleline Yield Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doubleline Yield Opp 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 Index are associated (or correlated) with Doubleline Yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Doubleline Yield Opp has no effect on the direction of International Equity i.e., International Equity and Doubleline Yield go up and down completely randomly.

Pair Corralation between International Equity and Doubleline Yield

Assuming the 90 days horizon International Equity Index is expected to under-perform the Doubleline Yield. In addition to that, International Equity is 2.42 times more volatile than Doubleline Yield Opportunities. It trades about -0.11 of its total potential returns per unit of risk. Doubleline Yield Opportunities is currently generating about -0.2 per unit of volatility. If you would invest  1,622  in Doubleline Yield Opportunities on September 27, 2024 and sell it today you would lose (23.00) from holding Doubleline Yield Opportunities or give up 1.42% of portfolio value over 90 days.

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

International Equity Index  vs.  Doubleline Yield Opportunities

International Equity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Doubleline Yield Opp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with International Equity and Doubleline Yield

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

The idea behind International Equity Index and Doubleline Yield Opportunities 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.