Correlation Between Emerging Markets and Us Large
Can any of the company-specific risk be diversified away by investing in both Emerging Markets and Us Large 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 Us Large 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 Us Large Pany, you can compare the effects of market volatilities on Emerging Markets and Us Large 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 Us Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and Us Large.
Diversification Opportunities for Emerging Markets and Us Large
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Emerging and DFUSX is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Small and Us Large Pany in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us 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 Us Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Large Pany has no effect on the direction of Emerging Markets i.e., Emerging Markets and Us Large go up and down completely randomly.
Pair Corralation between Emerging Markets and Us Large
Assuming the 90 days horizon Emerging Markets Small is expected to under-perform the Us Large. But the mutual fund apears to be less risky and, when comparing its historical volatility, Emerging Markets Small is 1.19 times less risky than Us Large. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Us Large Pany is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 3,859 in Us Large Pany on August 31, 2024 and sell it today you would earn a total of 151.00 from holding Us Large Pany or generate 3.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Emerging Markets Small vs. Us Large Pany
Performance |
| Timeline |
| Emerging Markets Small |
| Us Large Pany |
Emerging Markets and Us Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerging Markets and Us Large
The main advantage of trading using opposite Emerging Markets and Us Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Markets position performs unexpectedly, Us Large 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 Us Large will offset losses from the drop in Us Large's long position.| Emerging Markets vs. Scharf Global Opportunity | Emerging Markets vs. Materials Portfolio Fidelity | Emerging Markets vs. Volumetric Fund Volumetric | Emerging Markets vs. Bbh Partner Fund |
| Us Large vs. Us Large Cap | Us Large vs. Dfa International Small | Us Large vs. International Small Pany | Us Large vs. Us Micro Cap |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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