Correlation Between Absolute Convertible and Emerging Economies
Can any of the company-specific risk be diversified away by investing in both Absolute Convertible and Emerging Economies 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 Absolute Convertible and Emerging Economies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Absolute Convertible Arbitrage and Emerging Economies Fund, you can compare the effects of market volatilities on Absolute Convertible and Emerging Economies 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 Absolute Convertible with a short position of Emerging Economies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Convertible and Emerging Economies.
Diversification Opportunities for Absolute Convertible and Emerging Economies
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Absolute and Emerging is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Convertible Arbitrage and Emerging Economies Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Economies and Absolute Convertible 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 Absolute Convertible Arbitrage are associated (or correlated) with Emerging Economies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Economies has no effect on the direction of Absolute Convertible i.e., Absolute Convertible and Emerging Economies go up and down completely randomly.
Pair Corralation between Absolute Convertible and Emerging Economies
Assuming the 90 days horizon Absolute Convertible Arbitrage is expected to generate 0.06 times more return on investment than Emerging Economies. However, Absolute Convertible Arbitrage is 16.13 times less risky than Emerging Economies. It trades about 0.56 of its potential returns per unit of risk. Emerging Economies Fund is currently generating about -0.2 per unit of risk. If you would invest 1,143 in Absolute Convertible Arbitrage on August 31, 2024 and sell it today you would earn a total of 7.00 from holding Absolute Convertible Arbitrage or generate 0.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Absolute Convertible Arbitrage vs. Emerging Economies Fund
Performance |
| Timeline |
| Absolute Convertible |
| Emerging Economies |
Absolute Convertible and Emerging Economies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Absolute Convertible and Emerging Economies
The main advantage of trading using opposite Absolute Convertible and Emerging Economies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolute Convertible position performs unexpectedly, Emerging Economies 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 Economies will offset losses from the drop in Emerging Economies' long position.| Absolute Convertible vs. Calamos Market Neutral | Absolute Convertible vs. Calamos Market Neutral | Absolute Convertible vs. Aqr Diversified Arbitrage | Absolute Convertible vs. Aqr Diversified Arbitrage |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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