Correlation Between Emerging Markets and Ab Bond

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

Diversification Opportunities for Emerging Markets and Ab Bond

EmergingANBIXDiversified AwayEmergingANBIXDiversified Away100%
0.56
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Emerging and ANBIX is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Fund and Ab Bond Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Bond Inflation 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 Fund are associated (or correlated) with Ab Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Bond Inflation has no effect on the direction of Emerging Markets i.e., Emerging Markets and Ab Bond go up and down completely randomly.

Pair Corralation between Emerging Markets and Ab Bond

Assuming the 90 days horizon Emerging Markets Fund is expected to generate 5.16 times more return on investment than Ab Bond. However, Emerging Markets is 5.16 times more volatile than Ab Bond Inflation. It trades about 0.09 of its potential returns per unit of risk. Ab Bond Inflation is currently generating about 0.36 per unit of risk. If you would invest  1,365  in Emerging Markets Fund on November 30, 2024 and sell it today you would earn a total of  25.00  from holding Emerging Markets Fund or generate 1.83% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Emerging Markets Fund  vs.  Ab Bond Inflation

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -6-4-202
JavaScript chart by amCharts 3.21.15EMRYX ANBIX
       Timeline  
Emerging Markets 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Over the last 90 days Emerging Markets Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Emerging Markets is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb13.213.413.613.81414.214.4
Ab Bond Inflation 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Ab Bond Inflation are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Ab Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb10.1510.210.2510.310.3510.4

Emerging Markets and Ab Bond Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.37-1.01-0.65-0.29-0.010.230.590.951.311.67 24681012
JavaScript chart by amCharts 3.21.15EMRYX ANBIX
       Returns  

Pair Trading with Emerging Markets and Ab Bond

The main advantage of trading using opposite Emerging Markets and Ab Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Markets position performs unexpectedly, Ab Bond 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 Ab Bond will offset losses from the drop in Ab Bond's long position.
The idea behind Emerging Markets Fund and Ab Bond Inflation 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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