Correlation Between International Equity and Global Core

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

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

Diversification Opportunities for International Equity and Global Core

-0.5

Correlation Coefficient

International Equity  Global Core

Very good diversification

The 3 months correlation between International and GLOBAL is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding International Equity Portfolio and Global E Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global E Portfolio and International Equity 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 Equity Portfolio are associated (or correlated) with Global Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global E Portfolio has no effect on the direction of International Equity i.e., International Equity and Global Core go up and down completely randomly.

Pair Corralation between International Equity and Global Core

Assuming the 90 days horizon International Equity Portfolio is expected to under-perform the Global Core. In addition to that, International Equity is 1.25 times more volatile than Global E Portfolio. It trades about -0.05 of its total potential returns per unit of risk. Global E Portfolio is currently generating about 0.19 per unit of volatility. If you would invest  1,884  in Global E Portfolio on September 4, 2024 and sell it today you would earn a total of  175.00  from holding Global E Portfolio or generate 9.29% return on investment over 90 days.

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

International Equity Portfolio  vs.  Global E Portfolio

International Equity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Global E Portfolio

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global E Portfolio are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Global Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with International Equity and Global Core

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

The idea behind International Equity Portfolio and Global E Portfolio 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.