Correlation Between Retirement Living and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Retirement Living 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 Retirement Living and Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Retirement Living Through and Emerging Markets Fund, you can compare the effects of market volatilities on Retirement Living 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 Retirement Living with a short position of Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Retirement Living and Emerging Markets.
Diversification Opportunities for Retirement Living and Emerging Markets
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Retirement and Emerging is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Retirement Living Through and Emerging Markets Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets and Retirement Living 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 Retirement Living Through 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 has no effect on the direction of Retirement Living i.e., Retirement Living and Emerging Markets go up and down completely randomly.
Pair Corralation between Retirement Living and Emerging Markets
Assuming the 90 days horizon Retirement Living Through is expected to generate 0.76 times more return on investment than Emerging Markets. However, Retirement Living Through is 1.32 times less risky than Emerging Markets. It trades about 0.14 of its potential returns per unit of risk. Emerging Markets Fund is currently generating about -0.28 per unit of risk. If you would invest 1,463 in Retirement Living Through on August 29, 2024 and sell it today you would earn a total of 28.00 from holding Retirement Living Through or generate 1.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Retirement Living Through vs. Emerging Markets Fund
Performance |
| Timeline |
| Retirement Living Through |
| Emerging Markets |
Retirement Living and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Retirement Living and Emerging Markets
The main advantage of trading using opposite Retirement Living and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Retirement Living 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.| Retirement Living vs. Regional Bank Fund | Retirement Living vs. Regional Bank Fund | Retirement Living vs. Multimanager Lifestyle Moderate | Retirement Living vs. Multimanager Lifestyle Balanced |
| Emerging Markets vs. Regional Bank Fund | Emerging Markets vs. Regional Bank Fund | Emerging Markets vs. Multimanager Lifestyle Moderate | Emerging Markets vs. Multimanager Lifestyle Balanced |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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