Correlation Between Strategic Alternatives and International Equity
Can any of the company-specific risk be diversified away by investing in both Strategic Alternatives and International Equity 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 Strategic Alternatives and International Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Strategic Alternatives Fund and International Equity Index, you can compare the effects of market volatilities on Strategic Alternatives and International Equity 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 Strategic Alternatives with a short position of International Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Alternatives and International Equity.
Diversification Opportunities for Strategic Alternatives and International Equity
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Strategic and International is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Alternatives Fund and International Equity Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Equity and Strategic Alternatives 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 Strategic Alternatives Fund are associated (or correlated) with International Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Equity has no effect on the direction of Strategic Alternatives i.e., Strategic Alternatives and International Equity go up and down completely randomly.
Pair Corralation between Strategic Alternatives and International Equity
Assuming the 90 days horizon Strategic Alternatives is expected to generate 2.95 times less return on investment than International Equity. But when comparing it to its historical volatility, Strategic Alternatives Fund is 6.33 times less risky than International Equity. It trades about 0.16 of its potential returns per unit of risk. International Equity Index is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,019 in International Equity Index on May 1, 2025 and sell it today you would earn a total of 355.00 from holding International Equity Index or generate 34.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Strategic Alternatives Fund vs. International Equity Index
Performance |
| Timeline |
| Strategic Alternatives |
| International Equity |
Strategic Alternatives and International Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Strategic Alternatives and International Equity
The main advantage of trading using opposite Strategic Alternatives and International Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Alternatives position performs unexpectedly, International Equity 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 Equity will offset losses from the drop in International Equity's long position.| Strategic Alternatives vs. L Abbett Growth | Strategic Alternatives vs. Qs Defensive Growth | Strategic Alternatives vs. Tfa Alphagen Growth | Strategic Alternatives vs. Pace Large Growth |
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Check out your portfolio center.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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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