Correlation Between Emerging Markets and International Investors
Can any of the company-specific risk be diversified away by investing in both Emerging Markets and International Investors 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 International Investors 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 International Investors Gold, you can compare the effects of market volatilities on Emerging Markets and International Investors 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 International Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and International Investors.
Diversification Opportunities for Emerging Markets and International Investors
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Emerging and International is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Fund and International Investors Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Investors 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 International Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Investors has no effect on the direction of Emerging Markets i.e., Emerging Markets and International Investors go up and down completely randomly.
Pair Corralation between Emerging Markets and International Investors
Assuming the 90 days horizon Emerging Markets Fund is expected to under-perform the International Investors. But the mutual fund apears to be less risky and, when comparing its historical volatility, Emerging Markets Fund is 2.26 times less risky than International Investors. The mutual fund trades about -0.17 of its potential returns per unit of risk. The International Investors Gold is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 1,226 in International Investors Gold on August 29, 2024 and sell it today you would lose (34.00) from holding International Investors Gold or give up 2.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
Emerging Markets Fund vs. International Investors Gold
Performance |
| Timeline |
| Emerging Markets |
| International Investors |
Emerging Markets and International Investors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerging Markets and International Investors
The main advantage of trading using opposite Emerging Markets and International Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Markets position performs unexpectedly, International Investors 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 International Investors will offset losses from the drop in International Investors' long position.| Emerging Markets vs. Global Hard Assets | Emerging Markets vs. International Investors Gold | Emerging Markets vs. Emerging Markets Fund | Emerging Markets vs. Wells Fargo Emerging |
| International Investors vs. First Eagle Gold | International Investors vs. First Eagle Gold | International Investors vs. Oppenheimer Gold Special | International Investors 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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