Correlation Between Ab Global and Emerging Markets

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Can any of the company-specific risk be diversified away by investing in both Ab Global 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 Ab Global and Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ab Global Risk and Emerging Markets Bond, you can compare the effects of market volatilities on Ab Global 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 Ab Global with a short position of Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Global and Emerging Markets.

Diversification Opportunities for Ab Global and Emerging Markets

0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between CABIX and Emerging is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Ab Global Risk and Emerging Markets Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets Bond and Ab Global 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 Ab Global Risk 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 Bond has no effect on the direction of Ab Global i.e., Ab Global and Emerging Markets go up and down completely randomly.

Pair Corralation between Ab Global and Emerging Markets

Assuming the 90 days horizon Ab Global Risk is expected to generate 1.13 times more return on investment than Emerging Markets. However, Ab Global is 1.13 times more volatile than Emerging Markets Bond. It trades about 0.48 of its potential returns per unit of risk. Emerging Markets Bond is currently generating about 0.23 per unit of risk. If you would invest  1,767  in Ab Global Risk on September 14, 2024 and sell it today you would earn a total of  45.00  from holding Ab Global Risk or generate 2.55% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Ab Global Risk  vs.  Emerging Markets Bond

 Performance 
       Timeline  
Ab Global Risk 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Ab Global Risk are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Ab Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Emerging Markets Bond 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Emerging Markets Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Emerging Markets is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ab Global and Emerging Markets Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ab Global and Emerging Markets

The main advantage of trading using opposite Ab Global and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Global 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.
The idea behind Ab Global Risk and Emerging Markets Bond pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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