Correlation Between Emerging Markets and Core Plus
Can any of the company-specific risk be diversified away by investing in both Emerging Markets and Core Plus 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 Emerging Markets and Core Plus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerging Markets Debt and Core Plus Fund, you can compare the effects of market volatilities on Emerging Markets and Core Plus 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 Emerging Markets with a short position of Core Plus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and Core Plus.
Diversification Opportunities for Emerging Markets and Core Plus
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Emerging and Core is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Debt and Core Plus Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Plus Fund and Emerging Markets 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 Emerging Markets Debt are associated (or correlated) with Core Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Plus Fund has no effect on the direction of Emerging Markets i.e., Emerging Markets and Core Plus go up and down completely randomly.
Pair Corralation between Emerging Markets and Core Plus
Assuming the 90 days horizon Emerging Markets is expected to generate 1.45 times less return on investment than Core Plus. But when comparing it to its historical volatility, Emerging Markets Debt is 1.29 times less risky than Core Plus. It trades about 0.09 of its potential returns per unit of risk. Core Plus Fund is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 921.00 in Core Plus Fund on September 12, 2024 and sell it today you would earn a total of 6.00 from holding Core Plus Fund or generate 0.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerging Markets Debt vs. Core Plus Fund
Performance |
| Timeline |
| Emerging Markets Debt |
| Core Plus Fund |
Emerging Markets and Core Plus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerging Markets and Core Plus
The main advantage of trading using opposite Emerging Markets and Core Plus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Markets position performs unexpectedly, Core Plus 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 Core Plus will offset losses from the drop in Core Plus' long position.| Emerging Markets vs. Fidelity New Markets | Emerging Markets vs. Fidelity New Markets | Emerging Markets vs. Fidelity New Markets | Emerging Markets vs. SCOR PK |
| 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 |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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