Correlation Between Equity Growth and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Equity Growth 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 Equity Growth and Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Growth Fund and Emerging Markets Debt, you can compare the effects of market volatilities on Equity Growth 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 Equity Growth with a short position of Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Growth and Emerging Markets.
Diversification Opportunities for Equity Growth and Emerging Markets
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Equity and Emerging is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Equity Growth 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 Equity Growth 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 Equity Growth 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 Equity Growth i.e., Equity Growth and Emerging Markets go up and down completely randomly.
Pair Corralation between Equity Growth and Emerging Markets
Assuming the 90 days horizon Equity Growth Fund is expected to generate 2.69 times more return on investment than Emerging Markets. However, Equity Growth is 2.69 times more volatile than Emerging Markets Debt. It trades about 0.13 of its potential returns per unit of risk. Emerging Markets Debt is currently generating about 0.07 per unit of risk. If you would invest 3,441 in Equity Growth Fund on September 12, 2024 and sell it today you would earn a total of 58.00 from holding Equity Growth Fund or generate 1.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Equity Growth Fund vs. Emerging Markets Debt
Performance |
| Timeline |
| Equity Growth |
| Emerging Markets Debt |
Equity Growth and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Growth and Emerging Markets
The main advantage of trading using opposite Equity Growth and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Growth 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.| Equity Growth vs. Ab Global Risk | Equity Growth vs. Ab Global Risk | Equity Growth vs. Legg Mason Global | Equity Growth vs. Barings Global Floating |
| Emerging Markets vs. Emerging Markets Fund | Emerging Markets vs. Emerging Markets Fund | Emerging Markets vs. Emerging Markets Fund | Emerging Markets vs. Emerging Markets Fund |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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