Correlation Between Short-term Investment and International Business
Can any of the company-specific risk be diversified away by investing in both Short-term Investment and International Business 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 Short-term Investment and International Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Short Term Investment Trust and International Business Machines, you can compare the effects of market volatilities on Short-term Investment and International Business 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 Short-term Investment with a short position of International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short-term Investment and International Business.
Diversification Opportunities for Short-term Investment and International Business
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Short-term and International is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Short Term Investment Trust and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business and Short-term Investment 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 Short Term Investment Trust are associated (or correlated) with International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of Short-term Investment i.e., Short-term Investment and International Business go up and down completely randomly.
Pair Corralation between Short-term Investment and International Business
Assuming the 90 days horizon Short Term Investment Trust is expected to generate 96.0 times more return on investment than International Business. However, Short-term Investment is 96.0 times more volatile than International Business Machines. It trades about 0.14 of its potential returns per unit of risk. International Business Machines is currently generating about 0.07 per unit of risk. If you would invest 66.00 in Short Term Investment Trust on January 26, 2024 and sell it today you would earn a total of 34.00 from holding Short Term Investment Trust or generate 51.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Short Term Investment Trust vs. International Business Machine
Performance |
| Timeline |
| Short Term Investment |
| International Business |
Short-term Investment and International Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Short-term Investment and International Business
The main advantage of trading using opposite Short-term Investment and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short-term Investment position performs unexpectedly, International Business 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 Business will offset losses from the drop in International Business' long position.| Short-term Investment vs. Vanguard Total Stock | Short-term Investment vs. Vanguard 500 Index | Short-term Investment vs. Vanguard Total Stock | Short-term Investment vs. Vanguard Total Stock |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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