Correlation Between Us Small and Brandes International

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

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

Diversification Opportunities for Us Small and Brandes International

-0.68

Correlation Coefficient

Us Small  Brandes International

Excellent diversification

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

Pair Corralation between Us Small and Brandes International

Assuming the 90 days horizon Us Small Cap is expected to generate 1.93 times more return on investment than Brandes International. However, Us Small is 1.93 times more volatile than Brandes International Equity. It trades about 0.14 of its potential returns per unit of risk. Brandes International Equity is currently generating about -0.09 per unit of risk. If you would invest  4,684  in Us Small Cap on September 5, 2024 and sell it today you would earn a total of  575.00  from holding Us Small Cap or generate 12.28% return on investment over 90 days.

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

Us Small Cap  vs.  Brandes International Equity

Us Small Cap

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Us Small Cap are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Us Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Brandes International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brandes International Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Brandes International 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 Small and Brandes International

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

The idea behind Us Small Cap and Brandes 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.