Correlation Between Short Duration and Active International

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

By analyzing existing cross correlation between Short Duration Income and Active International Allocation, you can compare the effects of market volatilities on Short Duration and Active 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 Short Duration with a short position of Active International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Duration and Active International.

Diversification Opportunities for Short Duration and Active International

0.23

Correlation Coefficient

Short Duration  Active International

Modest diversification

The 3 months correlation between Short and Active is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Short Duration Income and Active International Allocatio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Active International and Short Duration 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 Duration Income are associated (or correlated) with Active International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Active International has no effect on the direction of Short Duration i.e., Short Duration and Active International go up and down completely randomly.

Pair Corralation between Short Duration and Active International

If you would invest  1,638  in Active International Allocation on August 31, 2024 and sell it today you would earn a total of  5.00  from holding Active International Allocation or generate 0.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	3.17%
Values	Daily Returns

Short Duration Income  vs.  Active International Allocatio

Short Duration Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Active International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Active International Allocation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Active 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 Short Duration and Active International

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

The idea behind Short Duration Income and Active International Allocation 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.