Correlation Between Emerging Markets and Enhanced
Can any of the company-specific risk be diversified away by investing in both Emerging Markets and Enhanced 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 Enhanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerging Markets Small and Enhanced Large Pany, you can compare the effects of market volatilities on Emerging Markets and Enhanced 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 Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and Enhanced.
Diversification Opportunities for Emerging Markets and Enhanced
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Emerging and Enhanced is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Small and Enhanced Large Pany in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enhanced Large Pany 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 Small are associated (or correlated) with Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enhanced Large Pany has no effect on the direction of Emerging Markets i.e., Emerging Markets and Enhanced go up and down completely randomly.
Pair Corralation between Emerging Markets and Enhanced
Assuming the 90 days horizon Emerging Markets is expected to generate 2.12 times less return on investment than Enhanced. But when comparing it to its historical volatility, Emerging Markets Small is 1.23 times less risky than Enhanced. It trades about 0.07 of its potential returns per unit of risk. Enhanced Large Pany is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 994.00 in Enhanced Large Pany on August 28, 2024 and sell it today you would earn a total of 558.00 from holding Enhanced Large Pany or generate 56.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerging Markets Small vs. Enhanced Large Pany
Performance |
| Timeline |
| Emerging Markets Small |
| Enhanced Large Pany |
Emerging Markets and Enhanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerging Markets and Enhanced
The main advantage of trading using opposite Emerging Markets and Enhanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Markets position performs unexpectedly, Enhanced 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 Enhanced will offset losses from the drop in Enhanced's long position.| Emerging Markets vs. Great West Real Estate | Emerging Markets vs. Deutsche Real Estate | Emerging Markets vs. Amg Managers Centersquare | Emerging Markets vs. Guggenheim Risk Managed |
| Enhanced vs. Us Micro Cap | Enhanced vs. Dfa Short Term Government | Enhanced vs. Emerging Markets Small | Enhanced vs. Aquagold International |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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