Correlation Between EM and MAPS

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

Diversification Opportunities for EM and MAPS

EMMAPSDiversified AwayEMMAPSDiversified Away100%
0.0
  Correlation Coefficient
 EM

Pay attention - limited upside

The 3 months correlation between EM and MAPS is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding EM and MAPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAPS and EM 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 EM are associated (or correlated) with MAPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAPS has no effect on the direction of EM i.e., EM and MAPS go up and down completely randomly.

Pair Corralation between EM and MAPS

If you would invest  0.01  in EM on November 23, 2024 and sell it today you would earn a total of  0.00  from holding EM or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy95.65%
ValuesDaily Returns

EM  vs.  MAPS

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -20-100102030
JavaScript chart by amCharts 3.21.15EM MAPS
       Timeline  
EM 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days EM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, EM is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb0.00010.0001050.000110.000115
MAPS 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in MAPS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, MAPS may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb0.0160.0180.020.0220.0240.0260.0280.03

EM and MAPS Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15 0.0010.0020.0030.004
JavaScript chart by amCharts 3.21.15EM MAPS
       Returns  

Pair Trading with EM and MAPS

The main advantage of trading using opposite EM and MAPS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EM position performs unexpectedly, MAPS 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 MAPS will offset losses from the drop in MAPS's long position.
The idea behind EM and MAPS 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.
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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 Stocks Directory module to find actively traded stocks across global markets.

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