Correlation Between International Advantage and Destinations International
Can any of the company-specific risk be diversified away by investing in both International Advantage and Destinations 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 International Advantage and Destinations International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Advantage Portfolio and Destinations International Equity, you can compare the effects of market volatilities on International Advantage and Destinations 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 International Advantage with a short position of Destinations International. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Advantage and Destinations International.
Diversification Opportunities for International Advantage and Destinations International
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between International and Destinations is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding International Advantage Portfo and Destinations International Equ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Destinations International and International Advantage 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 International Advantage Portfolio are associated (or correlated) with Destinations International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Destinations International has no effect on the direction of International Advantage i.e., International Advantage and Destinations International go up and down completely randomly.
Pair Corralation between International Advantage and Destinations International
Assuming the 90 days horizon International Advantage Portfolio is expected to under-perform the Destinations International. In addition to that, International Advantage is 1.2 times more volatile than Destinations International Equity. It trades about -0.32 of its total potential returns per unit of risk. Destinations International Equity is currently generating about -0.17 per unit of volatility. If you would invest 1,125 in Destinations International Equity on January 24, 2024 and sell it today you would lose (26.00) from holding Destinations International Equity or give up 2.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Advantage Portfo vs. Destinations International Equ
Performance |
| Timeline |
| International Advantage |
| Destinations International |
International Advantage and Destinations International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Advantage and Destinations International
The main advantage of trading using opposite International Advantage and Destinations International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Advantage position performs unexpectedly, Destinations 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 Destinations International will offset losses from the drop in Destinations International's long position.| International Advantage vs. Emerging Markets Equity | International Advantage vs. Global Fixed Income | International Advantage vs. Global Fixed Income | International Advantage vs. Global Fixed Income |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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