Correlation Between Emerging Markets and Growth Allocation
Can any of the company-specific risk be diversified away by investing in both Emerging Markets and Growth Allocation 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 Growth Allocation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerging Markets Equity and Growth Allocation Fund, you can compare the effects of market volatilities on Emerging Markets and Growth Allocation 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 Growth Allocation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and Growth Allocation.
Diversification Opportunities for Emerging Markets and Growth Allocation
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Emerging and Growth is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Equity and Growth Allocation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Allocation 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 Equity are associated (or correlated) with Growth Allocation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Allocation has no effect on the direction of Emerging Markets i.e., Emerging Markets and Growth Allocation go up and down completely randomly.
Pair Corralation between Emerging Markets and Growth Allocation
Assuming the 90 days horizon Emerging Markets is expected to generate 1.49 times less return on investment than Growth Allocation. In addition to that, Emerging Markets is 1.61 times more volatile than Growth Allocation Fund. It trades about 0.11 of its total potential returns per unit of risk. Growth Allocation Fund is currently generating about 0.27 per unit of volatility. If you would invest 1,269 in Growth Allocation Fund on November 8, 2024 and sell it today you would earn a total of 43.00 from holding Growth Allocation Fund or generate 3.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerging Markets Equity vs. Growth Allocation Fund
Performance |
| Timeline |
| Emerging Markets Equity |
| Growth Allocation |
Emerging Markets and Growth Allocation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerging Markets and Growth Allocation
The main advantage of trading using opposite Emerging Markets and Growth Allocation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Markets position performs unexpectedly, Growth Allocation 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 Growth Allocation will offset losses from the drop in Growth Allocation's long position.| Emerging Markets vs. Ishares Municipal Bond | Emerging Markets vs. Us Government Securities | Emerging Markets vs. Blrc Sgy Mnp | Emerging Markets vs. Nuveen Strategic Municipal |
| Growth Allocation vs. Fidelity Advisor Energy | Growth Allocation vs. Ivy Natural Resources | Growth Allocation vs. Clearbridge Energy Mlp | Growth Allocation vs. Short Oil Gas |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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