Correlation Between Us Government and International Stock

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

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

Diversification Opportunities for Us Government and International Stock

0.0

Correlation Coefficient

Us Government  International Stock

Pay attention - limited upside

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

Pair Corralation between Us Government and International Stock

If you would invest  0.00  in International Stock Fund on October 4, 2024 and sell it today you would earn a total of  0.00  from holding International Stock Fund or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	4.76%
Values	Daily Returns

Us Government Securities  vs.  International Stock Fund

Us Government Securities

Risk-Adjusted Performance

0 of 100

Very Weak

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

International Stock

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Us Government and International Stock

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

The idea behind Us Government Securities and International Stock Fund 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.