Correlation Between International Small and Acr International

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

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

Diversification Opportunities for International Small and Acr International

0.93

Correlation Coefficient

International Small  Acr International

Almost no diversification

The 3 months correlation between International and Acr is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding International Small Pany and Acr International Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acr International Quality and International Small 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 Small Pany are associated (or correlated) with Acr International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acr International Quality has no effect on the direction of International Small i.e., International Small and Acr International go up and down completely randomly.

Pair Corralation between International Small and Acr International

Assuming the 90 days horizon International Small Pany is expected to generate 0.67 times more return on investment than Acr International. However, International Small Pany is 1.49 times less risky than Acr International. It trades about -0.21 of its potential returns per unit of risk. Acr International Quality is currently generating about -0.35 per unit of risk. If you would invest  2,128  in International Small Pany on September 28, 2024 and sell it today you would lose (190.00) from holding International Small Pany or give up 8.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

International Small Pany  vs.  Acr International Quality

International Small Pany

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Small Pany has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Acr International Quality

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acr International Quality has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with International Small and Acr International

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

The idea behind International Small Pany and Acr International Quality 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..