Correlation Between Emerging Markets and Strategic Allocation
Can any of the company-specific risk be diversified away by investing in both Emerging Markets and Strategic Allocation 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 Strategic Allocation 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 Strategic Allocation Servative, you can compare the effects of market volatilities on Emerging Markets and Strategic Allocation 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 Strategic Allocation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and Strategic Allocation.
Diversification Opportunities for Emerging Markets and Strategic Allocation
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Emerging and Strategic is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Fund and Strategic Allocation Servative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Allocation 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 Strategic Allocation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Allocation has no effect on the direction of Emerging Markets i.e., Emerging Markets and Strategic Allocation go up and down completely randomly.
Pair Corralation between Emerging Markets and Strategic Allocation
Assuming the 90 days horizon Emerging Markets Fund is expected to generate 2.12 times more return on investment than Strategic Allocation. However, Emerging Markets is 2.12 times more volatile than Strategic Allocation Servative. It trades about 0.04 of its potential returns per unit of risk. Strategic Allocation Servative is currently generating about 0.07 per unit of risk. If you would invest 968.00 in Emerging Markets Fund on August 28, 2024 and sell it today you would earn a total of 192.00 from holding Emerging Markets Fund or generate 19.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerging Markets Fund vs. Strategic Allocation Servative
Performance |
| Timeline |
| Emerging Markets |
| Strategic Allocation |
Emerging Markets and Strategic Allocation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerging Markets and Strategic Allocation
The main advantage of trading using opposite Emerging Markets and Strategic Allocation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Markets position performs unexpectedly, Strategic Allocation 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 Strategic Allocation will offset losses from the drop in Strategic Allocation's long position.| Emerging Markets vs. International Growth Fund | Emerging Markets vs. Value Fund I | Emerging Markets vs. Mfs International New | Emerging Markets vs. Heritage Fund I |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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