Correlation Between Emerging Markets and Disciplined Growth
Can any of the company-specific risk be diversified away by investing in both Emerging Markets and Disciplined Growth 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 Disciplined Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerging Markets Fund and Disciplined Growth Fund, you can compare the effects of market volatilities on Emerging Markets and Disciplined Growth 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 Disciplined Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and Disciplined Growth.
Diversification Opportunities for Emerging Markets and Disciplined Growth
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Emerging and Disciplined is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Fund and Disciplined Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Disciplined Growth 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 Fund are associated (or correlated) with Disciplined Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Disciplined Growth has no effect on the direction of Emerging Markets i.e., Emerging Markets and Disciplined Growth go up and down completely randomly.
Pair Corralation between Emerging Markets and Disciplined Growth
Assuming the 90 days horizon Emerging Markets is expected to generate 3.22 times less return on investment than Disciplined Growth. But when comparing it to its historical volatility, Emerging Markets Fund is 1.18 times less risky than Disciplined Growth. It trades about 0.03 of its potential returns per unit of risk. Disciplined Growth Fund is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,545 in Disciplined Growth Fund on August 26, 2024 and sell it today you would earn a total of 329.00 from holding Disciplined Growth Fund or generate 12.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerging Markets Fund vs. Disciplined Growth Fund
Performance |
| Timeline |
| Emerging Markets |
| Disciplined Growth |
Emerging Markets and Disciplined Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerging Markets and Disciplined Growth
The main advantage of trading using opposite Emerging Markets and Disciplined Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Markets position performs unexpectedly, Disciplined Growth 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 Disciplined Growth will offset losses from the drop in Disciplined Growth's long position.| Emerging Markets vs. Heritage Fund Investor | Emerging Markets vs. Real Estate Fund | Emerging Markets vs. Global Growth Fund | Emerging Markets vs. Utilities Fund Investor |
| Disciplined Growth vs. International Growth Fund | Disciplined Growth vs. Heritage Fund Investor | Disciplined Growth vs. Janus Global Research |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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