Correlation Between Sierra Core and International Investors

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

By analyzing existing cross correlation between Sierra E Retirement and International Investors Gold, you can compare the effects of market volatilities on Sierra Core and International Investors 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 Sierra Core with a short position of International Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sierra Core and International Investors.

Diversification Opportunities for Sierra Core and International Investors

-0.25

Correlation Coefficient

Sierra Core  International Investors

Very good diversification

The 3 months correlation between Sierra and International is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Sierra E Retirement and International Investors Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Investors and Sierra Core 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 Sierra E Retirement are associated (or correlated) with International Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Investors has no effect on the direction of Sierra Core i.e., Sierra Core and International Investors go up and down completely randomly.

Pair Corralation between Sierra Core and International Investors

Assuming the 90 days horizon Sierra E Retirement is expected to under-perform the International Investors. But the mutual fund apears to be less risky and, when comparing its historical volatility, Sierra E Retirement is 3.6 times less risky than International Investors. The mutual fund trades about -0.16 of its potential returns per unit of risk. The International Investors Gold is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  1,212  in International Investors Gold on December 29, 2024 and sell it today you would earn a total of  181.00  from holding International Investors Gold or generate 14.93% return on investment over 90 days.

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

Sierra E Retirement  vs.  International Investors Gold

Sierra E Retirement

Risk-Adjusted Performance

Very Weak

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

International Investors

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in International Investors Gold are ranked lower than 24 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, International Investors showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sierra Core and International Investors

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

The idea behind Sierra E Retirement and International Investors Gold 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.