Correlation Between Tax-managed International and Locorr Market

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

By analyzing existing cross correlation between Tax Managed International Equity and Locorr Market Trend, you can compare the effects of market volatilities on Tax-managed International and Locorr Market 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 Tax-managed International with a short position of Locorr Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tax-managed International and Locorr Market.

Diversification Opportunities for Tax-managed International and Locorr Market

-0.56

Correlation Coefficient

Tax-managed International  Locorr Market

Excellent diversification

The 3 months correlation between Tax-managed and Locorr is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Tax Managed International Equi and Locorr Market Trend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Locorr Market Trend and Tax-managed International 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 Tax Managed International Equity are associated (or correlated) with Locorr Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Locorr Market Trend has no effect on the direction of Tax-managed International i.e., Tax-managed International and Locorr Market go up and down completely randomly.

Pair Corralation between Tax-managed International and Locorr Market

Assuming the 90 days horizon Tax Managed International Equity is expected to under-perform the Locorr Market. In addition to that, Tax-managed International is 1.05 times more volatile than Locorr Market Trend. It trades about -0.05 of its total potential returns per unit of risk. Locorr Market Trend is currently generating about 0.06 per unit of volatility. If you would invest  1,012  in Locorr Market Trend on October 26, 2024 and sell it today you would earn a total of  24.00  from holding Locorr Market Trend or generate 2.37% return on investment over 90 days.

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

Tax Managed International Equi  vs.  Locorr Market Trend

Tax-managed International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Locorr Market Trend

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Locorr Market Trend are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Locorr Market is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tax-managed International and Locorr Market

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

The idea behind Tax Managed International Equity and Locorr Market Trend 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.