Correlation Between Core Plus and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Core Plus 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 Core Plus and Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Core Plus Fund and Emerging Markets Debt, you can compare the effects of market volatilities on Core Plus 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 Core Plus with a short position of Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Core Plus and Emerging Markets.
Diversification Opportunities for Core Plus and Emerging Markets
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Core and Emerging is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Core Plus Fund and Emerging Markets Debt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets Debt and Core Plus 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 Core Plus Fund 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 Debt has no effect on the direction of Core Plus i.e., Core Plus and Emerging Markets go up and down completely randomly.
Pair Corralation between Core Plus and Emerging Markets
Assuming the 90 days horizon Core Plus Fund is expected to generate 1.01 times more return on investment than Emerging Markets. However, Core Plus is 1.01 times more volatile than Emerging Markets Debt. It trades about 0.12 of its potential returns per unit of risk. Emerging Markets Debt is currently generating about -0.01 per unit of risk. If you would invest 919.00 in Core Plus Fund on September 4, 2024 and sell it today you would earn a total of 8.00 from holding Core Plus Fund or generate 0.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Core Plus Fund vs. Emerging Markets Debt
Performance |
| Timeline |
| Core Plus Fund |
| Emerging Markets Debt |
Core Plus and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Core Plus and Emerging Markets
The main advantage of trading using opposite Core Plus and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Core Plus 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.| Core Plus vs. Diversified Bond Fund | Core Plus vs. High Yield Fund Investor | Core Plus vs. Government Bond Fund | Core Plus vs. Short Duration Inflation |
| Emerging Markets vs. Advent Claymore Convertible | Emerging Markets vs. Rationalpier 88 Convertible | Emerging Markets vs. Fidelity Sai Convertible | Emerging Markets vs. Putnam Convertible Incm Gwth |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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