Correlation Between Tax-managed International and Mirova International

Can any of the company-specific risk be diversified away by investing in both Tax-managed International and Mirova International 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 Mirova International 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 Mirova International Sustainable, you can compare the effects of market volatilities on Tax-managed International and Mirova International 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 Mirova International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tax-managed International and Mirova International.

Diversification Opportunities for Tax-managed International and Mirova International

0.94

Correlation Coefficient

Tax-managed International  Mirova International

Almost no diversification

The 3 months correlation between Tax-managed and Mirova is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Tax Managed International Equi and Mirova International Sustainab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mirova International 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 Mirova International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mirova International has no effect on the direction of Tax-managed International i.e., Tax-managed International and Mirova International go up and down completely randomly.

Pair Corralation between Tax-managed International and Mirova International

Assuming the 90 days horizon Tax-managed International is expected to generate 1.02 times less return on investment than Mirova International. But when comparing it to its historical volatility, Tax Managed International Equity is 1.16 times less risky than Mirova International. It trades about 0.16 of its potential returns per unit of risk. Mirova International Sustainable is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,201  in Mirova International Sustainable on December 22, 2024 and sell it today you would earn a total of  97.00  from holding Mirova International Sustainable or generate 8.08% return on investment over 90 days.

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

Tax Managed International Equi  vs.  Mirova International Sustainab

Tax-managed International

Risk-Adjusted Performance

Good

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

Mirova International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mirova International Sustainable are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Mirova International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Tax-managed International and Mirova International

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

The idea behind Tax Managed International Equity and Mirova International Sustainable 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.