Correlation Between Balanced Strategy and International Developed
Can any of the company-specific risk be diversified away by investing in both Balanced Strategy and International Developed 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 Developed 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 Developed Markets, you can compare the effects of market volatilities on Balanced Strategy and International Developed 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 Developed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Strategy and International Developed.
Diversification Opportunities for Balanced Strategy and International Developed
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Balanced and International is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Strategy Fund and International Developed Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Developed 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 Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Developed has no effect on the direction of Balanced Strategy i.e., Balanced Strategy and International Developed go up and down completely randomly.
Pair Corralation between Balanced Strategy and International Developed
Assuming the 90 days horizon Balanced Strategy Fund is expected to generate 0.43 times more return on investment than International Developed. However, Balanced Strategy Fund is 2.3 times less risky than International Developed. It trades about -0.18 of its potential returns per unit of risk. International Developed Markets is currently generating about -0.2 per unit of risk. If you would invest 1,099 in Balanced Strategy Fund on September 26, 2024 and sell it today you would lose (23.00) from holding Balanced Strategy Fund or give up 2.09% of portfolio value 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 Developed Market
Performance |
Timeline |
Balanced Strategy |
International Developed |
Balanced Strategy and International Developed Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Balanced Strategy and International Developed
The main advantage of trading using opposite Balanced Strategy and International Developed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balanced Strategy position performs unexpectedly, International Developed 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 Developed will offset losses from the drop in International Developed's long position.Balanced Strategy vs. International Developed Markets | Balanced Strategy vs. Global Real Estate | Balanced Strategy vs. Global Real Estate | Balanced Strategy vs. Global Real Estate |
International Developed vs. Global Real Estate | International Developed vs. Global Real Estate | International Developed vs. Global Real Estate | International Developed vs. Global Real Estate |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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