Correlation Between Us Government and International Growth

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

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

Diversification Opportunities for Us Government and International Growth

0.68

Correlation Coefficient

Us Government  International Growth

Poor diversification

The 3 months correlation between AMUSX and International is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Securities and International Growth And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Growth And and Us Government 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 Us Government Securities are associated (or correlated) with International Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Growth And has no effect on the direction of Us Government i.e., Us Government and International Growth go up and down completely randomly.

Pair Corralation between Us Government and International Growth

Assuming the 90 days horizon Us Government is expected to generate 4.65 times less return on investment than International Growth. But when comparing it to its historical volatility, Us Government Securities is 1.71 times less risky than International Growth. It trades about 0.02 of its potential returns per unit of risk. International Growth And is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,074  in International Growth And on September 19, 2024 and sell it today you would earn a total of  563.00  from holding International Growth And or generate 18.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Us Government Securities  vs.  International Growth And

Us Government Securities

Risk-Adjusted Performance

0 of 100

Very Weak

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

International Growth And

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Us Government and International Growth

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

The idea behind Us Government Securities and International Growth And 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.