Correlation Between Emerging Markets and Global Technology
Can any of the company-specific risk be diversified away by investing in both Emerging Markets and Global Technology 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 Global Technology 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 Global Technology Portfolio, you can compare the effects of market volatilities on Emerging Markets and Global Technology 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 Global Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and Global Technology.
Diversification Opportunities for Emerging Markets and Global Technology
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Emerging and Global is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Fund and Global Technology Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Technology 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 Global Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Technology has no effect on the direction of Emerging Markets i.e., Emerging Markets and Global Technology go up and down completely randomly.
Pair Corralation between Emerging Markets and Global Technology
Assuming the 90 days horizon Emerging Markets Fund is expected to generate 0.6 times more return on investment than Global Technology. However, Emerging Markets Fund is 1.67 times less risky than Global Technology. It trades about 0.04 of its potential returns per unit of risk. Global Technology Portfolio is currently generating about -0.02 per unit of risk. If you would invest 866.00 in Emerging Markets Fund on October 22, 2024 and sell it today you would earn a total of 4.00 from holding Emerging Markets Fund or generate 0.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerging Markets Fund vs. Global Technology Portfolio
Performance |
| Timeline |
| Emerging Markets |
| Global Technology |
Emerging Markets and Global Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerging Markets and Global Technology
The main advantage of trading using opposite Emerging Markets and Global Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Markets position performs unexpectedly, Global Technology 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 Global Technology will offset losses from the drop in Global Technology's long position.| Emerging Markets vs. Global Technology Portfolio | Emerging Markets vs. Firsthand Technology Opportunities | Emerging Markets vs. Invesco Technology Fund | Emerging Markets vs. Specialized Technology Fund |
| Global Technology vs. Jpmorgan High Yield | Global Technology vs. Buffalo High Yield | Global Technology vs. T Rowe Price | Global Technology vs. Artisan High Income |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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