Correlation Between American Funds and Investec Emerging
Can any of the company-specific risk be diversified away by investing in both American Funds and Investec Emerging 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 American Funds and Investec Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds New and Investec Emerging Markets, you can compare the effects of market volatilities on American Funds and Investec Emerging 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 American Funds with a short position of Investec Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Investec Emerging.
Diversification Opportunities for American Funds and Investec Emerging
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Investec is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding American Funds New and Investec Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investec Emerging Markets and American Funds 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 American Funds New are associated (or correlated) with Investec Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investec Emerging Markets has no effect on the direction of American Funds i.e., American Funds and Investec Emerging go up and down completely randomly.
Pair Corralation between American Funds and Investec Emerging
Assuming the 90 days horizon American Funds New is expected to generate 0.39 times more return on investment than Investec Emerging. However, American Funds New is 2.59 times less risky than Investec Emerging. It trades about 0.09 of its potential returns per unit of risk. Investec Emerging Markets is currently generating about -0.02 per unit of risk. If you would invest 8,177 in American Funds New on September 13, 2024 and sell it today you would earn a total of 75.00 from holding American Funds New or generate 0.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds New vs. Investec Emerging Markets
Performance |
| Timeline |
| American Funds New |
| Investec Emerging Markets |
American Funds and Investec Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Investec Emerging
The main advantage of trading using opposite American Funds and Investec Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Investec Emerging 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 Investec Emerging will offset losses from the drop in Investec Emerging's long position.| American Funds vs. Income Fund Of | American Funds vs. New World Fund | American Funds vs. American Mutual Fund | American Funds vs. American Mutual Fund |
| Investec Emerging vs. Origin Emerging Markets | Investec Emerging vs. Franklin Emerging Market | Investec Emerging vs. Barings Emerging Markets | Investec Emerging vs. Shelton Emerging Markets |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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