Correlation Between International Government and Growth Fund

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

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

Diversification Opportunities for International Government and Growth Fund

-0.71

Correlation Coefficient

International Government  Growth Fund

Pay attention - limited upside

The 3 months correlation between International and Growth is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding International Government Bond and Growth Fund Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Fund Growth and International Government 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 Government Bond are associated (or correlated) with Growth Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Fund Growth has no effect on the direction of International Government i.e., International Government and Growth Fund go up and down completely randomly.

Pair Corralation between International Government and Growth Fund

Assuming the 90 days horizon International Government is expected to generate 12.29 times less return on investment than Growth Fund. But when comparing it to its historical volatility, International Government Bond is 2.55 times less risky than Growth Fund. It trades about 0.06 of its potential returns per unit of risk. Growth Fund Growth is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  1,643  in Growth Fund Growth on September 4, 2024 and sell it today you would earn a total of  104.00  from holding Growth Fund Growth or generate 6.33% return on investment over 90 days.

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

International Government Bond  vs.  Growth Fund Growth

International Government

Risk-Adjusted Performance

0 of 100

Very Weak

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

Growth Fund Growth

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Growth Fund Growth are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Growth Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with International Government and Growth Fund

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

The idea behind International Government Bond and Growth Fund Growth 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.