Correlation Between Balanced Strategy and International Fund

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

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

Diversification Opportunities for Balanced Strategy and International Fund

0.33

Correlation Coefficient

Balanced Strategy  International Fund

Weak diversification

The 3 months correlation between Balanced and International is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Strategy Fund and International Fund Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Fund and Balanced Strategy 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 Balanced Strategy Fund are associated (or correlated) with International Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Fund has no effect on the direction of Balanced Strategy i.e., Balanced Strategy and International Fund go up and down completely randomly.

Pair Corralation between Balanced Strategy and International Fund

Assuming the 90 days horizon Balanced Strategy Fund is expected to under-perform the International Fund. But the mutual fund apears to be less risky and, when comparing its historical volatility, Balanced Strategy Fund is 1.52 times less risky than International Fund. The mutual fund trades about -0.01 of its potential returns per unit of risk. The International Fund International is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,583  in International Fund International on December 24, 2024 and sell it today you would earn a total of  233.00  from holding International Fund International or generate 9.02% return on investment over 90 days.

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

Balanced Strategy Fund  vs.  International Fund Internation

Balanced Strategy

Risk-Adjusted Performance

Very Weak

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

International Fund

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in International Fund International are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, International Fund may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Balanced Strategy and International Fund

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

The idea behind Balanced Strategy Fund and International Fund International 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.