Correlation Between Rational Defensive and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Rational Defensive and Emerging Markets 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 Rational Defensive and Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rational Defensive Growth and Emerging Markets Portfolio, you can compare the effects of market volatilities on Rational Defensive and Emerging Markets 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 Rational Defensive with a short position of Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rational Defensive and Emerging Markets.
Diversification Opportunities for Rational Defensive and Emerging Markets
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Rational and Emerging is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Rational Defensive Growth and Emerging Markets Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets Por and Rational Defensive 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 Rational Defensive Growth are associated (or correlated) with Emerging Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets Por has no effect on the direction of Rational Defensive i.e., Rational Defensive and Emerging Markets go up and down completely randomly.
Pair Corralation between Rational Defensive and Emerging Markets
Assuming the 90 days horizon Rational Defensive Growth is expected to generate 1.17 times more return on investment than Emerging Markets. However, Rational Defensive is 1.17 times more volatile than Emerging Markets Portfolio. It trades about 0.12 of its potential returns per unit of risk. Emerging Markets Portfolio is currently generating about 0.04 per unit of risk. If you would invest 2,626 in Rational Defensive Growth on September 2, 2024 and sell it today you would earn a total of 1,416 from holding Rational Defensive Growth or generate 53.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rational Defensive Growth vs. Emerging Markets Portfolio
Performance |
| Timeline |
| Rational Defensive Growth |
| Emerging Markets Por |
Rational Defensive and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rational Defensive and Emerging Markets
The main advantage of trading using opposite Rational Defensive and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rational Defensive position performs unexpectedly, Emerging Markets 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 Emerging Markets will offset losses from the drop in Emerging Markets' long position.| Rational Defensive vs. Tax Managed Large Cap | Rational Defensive vs. Transamerica Large Cap | Rational Defensive vs. Fidelity Series 1000 | Rational Defensive vs. Fundamental Large Cap |
| Emerging Markets vs. Nuveen Arizona Municipal | Emerging Markets vs. Gamco Global Telecommunications | Emerging Markets vs. Transamerica Funds | Emerging Markets vs. Pace Municipal Fixed |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
Other Complementary Tools
| Transaction History View history of all your transactions and understand their impact on performance | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |