Correlation Between Large Company and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Large Company 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 Large Company and Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Large Pany Value and Emerging Markets Fund, you can compare the effects of market volatilities on Large Company 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 Large Company with a short position of Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large Company and Emerging Markets.
Diversification Opportunities for Large Company and Emerging Markets
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Large and Emerging is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Large Pany Value and Emerging Markets Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets and Large Company 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 Large Pany Value 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 has no effect on the direction of Large Company i.e., Large Company and Emerging Markets go up and down completely randomly.
Pair Corralation between Large Company and Emerging Markets
Assuming the 90 days horizon Large Pany Value is expected to generate 0.54 times more return on investment than Emerging Markets. However, Large Pany Value is 1.84 times less risky than Emerging Markets. It trades about 0.09 of its potential returns per unit of risk. Emerging Markets Fund is currently generating about -0.01 per unit of risk. If you would invest 1,120 in Large Pany Value on August 30, 2024 and sell it today you would earn a total of 34.00 from holding Large Pany Value or generate 3.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Large Pany Value vs. Emerging Markets Fund
Performance |
| Timeline |
| Large Pany Value |
| Emerging Markets |
Large Company and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Large Company and Emerging Markets
The main advantage of trading using opposite Large Company and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large Company 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.| Large Company vs. Small Pany Fund | Large Company vs. Value Fund Investor | Large Company vs. Small Cap Value | Large Company vs. Real Estate Fund |
| Emerging Markets vs. Heritage Fund Investor | Emerging Markets vs. Real Estate Fund | Emerging Markets vs. Global Growth Fund | Emerging Markets vs. Utilities Fund Investor |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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