Correlation Between Inverse High and International Equity
Can any of the company-specific risk be diversified away by investing in both Inverse High and International Equity 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 Inverse High and International Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Inverse High Yield and International Equity Fund, you can compare the effects of market volatilities on Inverse High and International Equity 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 Inverse High with a short position of International Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse High and International Equity.
Diversification Opportunities for Inverse High and International Equity
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Inverse and International is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Inverse High Yield and International Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Equity and Inverse High 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 Inverse High Yield are associated (or correlated) with International Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Equity has no effect on the direction of Inverse High i.e., Inverse High and International Equity go up and down completely randomly.
Pair Corralation between Inverse High and International Equity
Assuming the 90 days horizon Inverse High Yield is expected to generate 0.32 times more return on investment than International Equity. However, Inverse High Yield is 3.15 times less risky than International Equity. It trades about -0.02 of its potential returns per unit of risk. International Equity Fund is currently generating about -0.06 per unit of risk. If you would invest 5,044 in Inverse High Yield on September 25, 2024 and sell it today you would lose (40.00) from holding Inverse High Yield or give up 0.79% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Inverse High Yield vs. International Equity Fund
Performance |
Timeline |
Inverse High Yield |
International Equity |
Inverse High and International Equity Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Inverse High and International Equity
The main advantage of trading using opposite Inverse High and International Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse High position performs unexpectedly, International Equity 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 Equity will offset losses from the drop in International Equity's long position.Inverse High vs. Ab Bond Inflation | Inverse High vs. Atac Inflation Rotation | Inverse High vs. Loomis Sayles Inflation | Inverse High vs. Ab Bond Inflation |
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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