Correlation Between International Equity and Moderately Aggressive
Can any of the company-specific risk be diversified away by investing in both International Equity and Moderately Aggressive 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 Moderately Aggressive 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 Moderately Aggressive Balanced, you can compare the effects of market volatilities on International Equity and Moderately Aggressive 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 Moderately Aggressive. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Equity and Moderately Aggressive.
Diversification Opportunities for International Equity and Moderately Aggressive
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between International and Moderately is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding International Equity Portfolio and Moderately Aggressive Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderately Aggressive 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 Moderately Aggressive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderately Aggressive has no effect on the direction of International Equity i.e., International Equity and Moderately Aggressive go up and down completely randomly.
Pair Corralation between International Equity and Moderately Aggressive
Assuming the 90 days horizon International Equity is expected to generate 1.03 times less return on investment than Moderately Aggressive. In addition to that, International Equity is 1.65 times more volatile than Moderately Aggressive Balanced. It trades about 0.12 of its total potential returns per unit of risk. Moderately Aggressive Balanced is currently generating about 0.2 per unit of volatility. If you would invest 1,226 in Moderately Aggressive Balanced on June 12, 2025 and sell it today you would earn a total of 71.00 from holding Moderately Aggressive Balanced or generate 5.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Equity Portfolio vs. Moderately Aggressive Balanced
Performance |
| Timeline |
| International Equity |
| Moderately Aggressive |
International Equity and Moderately Aggressive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Equity and Moderately Aggressive
The main advantage of trading using opposite International Equity and Moderately Aggressive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Equity position performs unexpectedly, Moderately Aggressive 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 Moderately Aggressive will offset losses from the drop in Moderately Aggressive's long position.| International Equity vs. Ab Bond Inflation | International Equity vs. Versatile Bond Portfolio | International Equity vs. Artisan High Income | International Equity vs. California Municipal Portfolio |
| Moderately Aggressive vs. Fidelity Sai Convertible | Moderately Aggressive vs. Absolute Convertible Arbitrage | Moderately Aggressive vs. Allianzgi Convertible Income |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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