Correlation Between Us Lg and International Small

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

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

Diversification Opportunities for Us Lg and International Small

-0.44

Correlation Coefficient

Us Lg  International Small

Very good diversification

The 3 months correlation between DUSQX and International is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Us Lg Cap and International Small Pany in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Small Pany and Us Lg 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 Lg Cap are associated (or correlated) with International Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Small Pany has no effect on the direction of Us Lg i.e., Us Lg and International Small go up and down completely randomly.

Pair Corralation between Us Lg and International Small

Assuming the 90 days horizon Us Lg Cap is expected to generate 0.87 times more return on investment than International Small. However, Us Lg Cap is 1.14 times less risky than International Small. It trades about 0.22 of its potential returns per unit of risk. International Small Pany is currently generating about -0.02 per unit of risk. If you would invest  3,051  in Us Lg Cap on September 2, 2024 and sell it today you would earn a total of  310.00  from holding Us Lg Cap or generate 10.16% return on investment over 90 days.

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

Us Lg Cap  vs.  International Small Pany

Us Lg Cap

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Us Lg Cap are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Us Lg may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 fairly strong basic indicators, International Small 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 Lg and International Small

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

The idea behind Us Lg Cap and International Small Pany 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.