Correlation Between High Income and International Fund

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

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

Diversification Opportunities for High Income and International Fund

-0.05

Correlation Coefficient

High Income  International Fund

Good diversification

The 3 months correlation between High and International is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding High Income Fund and International Fund Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Fund and High Income 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 High Income Fund are associated (or correlated) with International Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Fund has no effect on the direction of High Income i.e., High Income and International Fund go up and down completely randomly.

Pair Corralation between High Income and International Fund

Assuming the 90 days horizon High Income is expected to generate 1.19 times less return on investment than International Fund. But when comparing it to its historical volatility, High Income Fund is 3.36 times less risky than International Fund. It trades about 0.13 of its potential returns per unit of risk. International Fund International is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,265  in International Fund International on October 26, 2024 and sell it today you would earn a total of  428.00  from holding International Fund International or generate 18.9% return on investment over 90 days.

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

High Income Fund  vs.  International Fund Internation

High Income Fund

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in High Income Fund are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, High Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

International Fund

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with High Income and International Fund

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

The idea behind High Income Fund and International Fund International 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.