Correlation Between International Small and Core Plus

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

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

Diversification Opportunities for International Small and Core Plus

0.87

Correlation Coefficient

International Small  Core Plus

Very poor diversification

The 3 months correlation between International and Core is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding International Small Pany and Core Plus Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Plus Bond and International Small 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 Small Pany are associated (or correlated) with Core Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Plus Bond has no effect on the direction of International Small i.e., International Small and Core Plus go up and down completely randomly.

Pair Corralation between International Small and Core Plus

Assuming the 90 days horizon International Small Pany is expected to generate 3.0 times more return on investment than Core Plus. However, International Small is 3.0 times more volatile than Core Plus Bond. It trades about 0.16 of its potential returns per unit of risk. Core Plus Bond is currently generating about 0.15 per unit of risk. If you would invest  979.00  in International Small Pany on December 24, 2024 and sell it today you would earn a total of  85.00  from holding International Small Pany or generate 8.68% return on investment over 90 days.

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

International Small Pany  vs.  Core Plus Bond

International Small Pany

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in International Small Pany are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, International Small may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Core Plus Bond

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Core Plus Bond are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Core Plus 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 Small and Core Plus

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

The idea behind International Small Pany and Core Plus Bond 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.