Correlation Between Ab Bond and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Ab Bond and Emerging Markets 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 Ab Bond and Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ab Bond Inflation and Emerging Markets Portfolio, you can compare the effects of market volatilities on Ab Bond and Emerging Markets 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 Ab Bond with a short position of Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Bond and Emerging Markets.
Diversification Opportunities for Ab Bond and Emerging Markets
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between ABNCX and Emerging is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Ab Bond Inflation and Emerging Markets Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets Por and Ab Bond 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 Ab Bond Inflation are associated (or correlated) with Emerging Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets Por has no effect on the direction of Ab Bond i.e., Ab Bond and Emerging Markets go up and down completely randomly.
Pair Corralation between Ab Bond and Emerging Markets
Assuming the 90 days horizon Ab Bond is expected to generate 1.53 times less return on investment than Emerging Markets. But when comparing it to its historical volatility, Ab Bond Inflation is 4.56 times less risky than Emerging Markets. It trades about 0.07 of its potential returns per unit of risk. Emerging Markets Portfolio is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,249 in Emerging Markets Portfolio on September 12, 2024 and sell it today you would earn a total of 6.00 from holding Emerging Markets Portfolio or generate 0.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ab Bond Inflation vs. Emerging Markets Portfolio
Performance |
| Timeline |
| Ab Bond Inflation |
| Emerging Markets Por |
Ab Bond and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ab Bond and Emerging Markets
The main advantage of trading using opposite Ab Bond and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Bond position performs unexpectedly, Emerging Markets 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 Emerging Markets will offset losses from the drop in Emerging Markets' long position.| Ab Bond vs. SCOR PK | Ab Bond vs. Morningstar Unconstrained Allocation | Ab Bond vs. Thrivent High Yield | Ab Bond vs. Via Renewables |
| Emerging Markets vs. American Funds New | Emerging Markets vs. SCOR PK | Emerging Markets vs. Morningstar Unconstrained Allocation | Emerging Markets vs. Via Renewables |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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