Correlation Between Global Hard and Unconstrained Emerging
Can any of the company-specific risk be diversified away by investing in both Global Hard and Unconstrained 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 Global Hard and Unconstrained Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Hard Assets and Unconstrained Emerging Markets, you can compare the effects of market volatilities on Global Hard and Unconstrained 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 Global Hard with a short position of Unconstrained Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Hard and Unconstrained Emerging.
Diversification Opportunities for Global Hard and Unconstrained Emerging
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Global and Unconstrained is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Global Hard Assets and Unconstrained Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unconstrained Emerging and Global Hard 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 Global Hard Assets are associated (or correlated) with Unconstrained Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unconstrained Emerging has no effect on the direction of Global Hard i.e., Global Hard and Unconstrained Emerging go up and down completely randomly.
Pair Corralation between Global Hard and Unconstrained Emerging
Assuming the 90 days horizon Global Hard Assets is expected to generate 1.88 times more return on investment than Unconstrained Emerging. However, Global Hard is 1.88 times more volatile than Unconstrained Emerging Markets. It trades about 0.12 of its potential returns per unit of risk. Unconstrained Emerging Markets is currently generating about -0.12 per unit of risk. If you would invest 4,232 in Global Hard Assets on September 1, 2024 and sell it today you would earn a total of 87.00 from holding Global Hard Assets or generate 2.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Hard Assets vs. Unconstrained Emerging Markets
Performance |
| Timeline |
| Global Hard Assets |
| Unconstrained Emerging |
Global Hard and Unconstrained Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Hard and Unconstrained Emerging
The main advantage of trading using opposite Global Hard and Unconstrained Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Hard position performs unexpectedly, Unconstrained 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 Unconstrained Emerging will offset losses from the drop in Unconstrained Emerging's long position.| Global Hard vs. Unconstrained Emerging Markets | Global Hard vs. Unconstrained Emerging Markets | Global Hard vs. Unconstrained Emerging Markets | Global Hard vs. Emerging Markets Fund |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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