Correlation Between Vident Core and Vident International

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

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

Diversification Opportunities for Vident Core and Vident International

-0.24

Correlation Coefficient

Vident Core  Vident International

Very good diversification

The 3 months correlation between Vident and Vident is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Vident Core Equity and Vident International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vident International and Vident 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 Vident Core Equity are associated (or correlated) with Vident International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vident International has no effect on the direction of Vident Core i.e., Vident Core and Vident International go up and down completely randomly.

Pair Corralation between Vident Core and Vident International

Given the investment horizon of 90 days Vident Core Equity is expected to under-perform the Vident International. In addition to that, Vident Core is 1.29 times more volatile than Vident International Equity. It trades about -0.05 of its total potential returns per unit of risk. Vident International Equity is currently generating about 0.13 per unit of volatility. If you would invest  2,500  in Vident International Equity on December 27, 2024 and sell it today you would earn a total of  157.00  from holding Vident International Equity or generate 6.28% return on investment over 90 days.

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

Vident Core Equity  vs.  Vident International Equity

Vident Core Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vident Core Equity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Vident Core is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Vident International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vident International Equity are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady fundamental indicators, Vident International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Vident Core and Vident International

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

The idea behind Vident Core Equity and Vident International Equity 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.