Correlation Between Barings Emerging and International Emerging
Can any of the company-specific risk be diversified away by investing in both Barings Emerging and International Emerging 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 Barings Emerging and International Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barings Emerging Markets and International Emerging Markets, you can compare the effects of market volatilities on Barings Emerging and International Emerging 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 Barings Emerging with a short position of International Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barings Emerging and International Emerging.
Diversification Opportunities for Barings Emerging and International Emerging
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Barings and International is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Barings Emerging Markets and International Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Emerging and Barings Emerging 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 Barings Emerging Markets are associated (or correlated) with International Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Emerging has no effect on the direction of Barings Emerging i.e., Barings Emerging and International Emerging go up and down completely randomly.
Pair Corralation between Barings Emerging and International Emerging
Assuming the 90 days horizon Barings Emerging Markets is expected to generate 0.36 times more return on investment than International Emerging. However, Barings Emerging Markets is 2.78 times less risky than International Emerging. It trades about 0.02 of its potential returns per unit of risk. International Emerging Markets is currently generating about -0.24 per unit of risk. If you would invest 757.00 in Barings Emerging Markets on August 28, 2024 and sell it today you would earn a total of 1.00 from holding Barings Emerging Markets or generate 0.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Barings Emerging Markets vs. International Emerging Markets
Performance |
| Timeline |
| Barings Emerging Markets |
| International Emerging |
Barings Emerging and International Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barings Emerging and International Emerging
The main advantage of trading using opposite Barings Emerging and International Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barings Emerging position performs unexpectedly, International Emerging 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 International Emerging will offset losses from the drop in International Emerging's long position.| Barings Emerging vs. Barings Active Short | Barings Emerging vs. Barings Emerging Markets | Barings Emerging vs. Barings Active Short | Barings Emerging vs. Barings Global Floating |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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