Correlation Between Emerging Markets and World Ex
Can any of the company-specific risk be diversified away by investing in both Emerging Markets and World Ex 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 World Ex into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerging Markets Targeted and World Ex Core, you can compare the effects of market volatilities on Emerging Markets and World Ex 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 World Ex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and World Ex.
Diversification Opportunities for Emerging Markets and World Ex
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Emerging and World is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Targeted and World Ex Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Ex Core 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 Targeted are associated (or correlated) with World Ex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Ex Core has no effect on the direction of Emerging Markets i.e., Emerging Markets and World Ex go up and down completely randomly.
Pair Corralation between Emerging Markets and World Ex
Assuming the 90 days horizon Emerging Markets is expected to generate 1.01 times less return on investment than World Ex. But when comparing it to its historical volatility, Emerging Markets Targeted is 1.06 times less risky than World Ex. It trades about 0.06 of its potential returns per unit of risk. World Ex Core is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,090 in World Ex Core on August 26, 2024 and sell it today you would earn a total of 245.00 from holding World Ex Core or generate 22.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerging Markets Targeted vs. World Ex Core
Performance |
| Timeline |
| Emerging Markets Targeted |
| World Ex Core |
Emerging Markets and World Ex Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerging Markets and World Ex
The main advantage of trading using opposite Emerging Markets and World Ex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Markets position performs unexpectedly, World Ex 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 World Ex will offset losses from the drop in World Ex's long position.| Emerging Markets vs. Lord Abbett Vertible | Emerging Markets vs. Fidelity Vertible Securities | Emerging Markets vs. Virtus Convertible | Emerging Markets vs. Allianzgi Vertible Fund |
| World Ex vs. Dfa Inflation Protected | World Ex vs. Dfa International Small | World Ex vs. Dfa International | World Ex vs. Dfa Municipal Real |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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