Correlation Between International Equities and Blue Chip
Can any of the company-specific risk be diversified away by investing in both International Equities and Blue Chip 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 Equities and Blue Chip into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Equities Index and Blue Chip Growth, you can compare the effects of market volatilities on International Equities and Blue Chip 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 Equities with a short position of Blue Chip. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Equities and Blue Chip.
Diversification Opportunities for International Equities and Blue Chip
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between International and Blue is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding International Equities Index and Blue Chip Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Chip Growth and International Equities 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 Equities Index are associated (or correlated) with Blue Chip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Chip Growth has no effect on the direction of International Equities i.e., International Equities and Blue Chip go up and down completely randomly.
Pair Corralation between International Equities and Blue Chip
Assuming the 90 days horizon International Equities is expected to generate 2.69 times less return on investment than Blue Chip. In addition to that, International Equities is 1.05 times more volatile than Blue Chip Growth. It trades about 0.18 of its total potential returns per unit of risk. Blue Chip Growth is currently generating about 0.51 per unit of volatility. If you would invest 1,848 in Blue Chip Growth on April 23, 2025 and sell it today you would earn a total of 120.00 from holding Blue Chip Growth or generate 6.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Equities Index vs. Blue Chip Growth
Performance |
| Timeline |
| International Equities |
| Blue Chip Growth |
International Equities and Blue Chip Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Equities and Blue Chip
The main advantage of trading using opposite International Equities and Blue Chip positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Equities position performs unexpectedly, Blue Chip 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 Blue Chip will offset losses from the drop in Blue Chip's long position.| International Equities vs. California Municipal Portfolio | International Equities vs. Cref Money Market | International Equities vs. Voya Government Money | International Equities vs. Ab Government Exchange |
| Blue Chip vs. Leader Short Term Bond | Blue Chip vs. Morningstar Defensive Bond | Blue Chip vs. Multisector Bond Sma | Blue Chip vs. Gmo High Yield |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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