Correlation Between Emerging Markets and Moderately Aggressive
Can any of the company-specific risk be diversified away by investing in both Emerging Markets and Moderately Aggressive 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 Moderately Aggressive 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 Moderately Aggressive Balanced, you can compare the effects of market volatilities on Emerging Markets and Moderately Aggressive 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 Moderately Aggressive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and Moderately Aggressive.
Diversification Opportunities for Emerging Markets and Moderately Aggressive
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Emerging and Moderately is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Fund and Moderately Aggressive Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderately Aggressive 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 Moderately Aggressive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderately Aggressive has no effect on the direction of Emerging Markets i.e., Emerging Markets and Moderately Aggressive go up and down completely randomly.
Pair Corralation between Emerging Markets and Moderately Aggressive
Assuming the 90 days horizon Emerging Markets Fund is expected to under-perform the Moderately Aggressive. In addition to that, Emerging Markets is 2.12 times more volatile than Moderately Aggressive Balanced. It trades about -0.01 of its total potential returns per unit of risk. Moderately Aggressive Balanced is currently generating about 0.07 per unit of volatility. If you would invest 992.00 in Moderately Aggressive Balanced on November 27, 2024 and sell it today you would earn a total of 190.00 from holding Moderately Aggressive Balanced or generate 19.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerging Markets Fund vs. Moderately Aggressive Balanced
Performance |
| Timeline |
| Emerging Markets |
| Moderately Aggressive |
Emerging Markets and Moderately Aggressive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerging Markets and Moderately Aggressive
The main advantage of trading using opposite Emerging Markets and Moderately Aggressive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Markets position performs unexpectedly, Moderately Aggressive 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 Moderately Aggressive will offset losses from the drop in Moderately Aggressive's long position.| Emerging Markets vs. Lord Abbett Diversified | Emerging Markets vs. American Funds Conservative | Emerging Markets vs. Jhancock Diversified Macro | Emerging Markets vs. Tax Free Conservative Income |
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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