Correlation Between Emerging Markets and Fundamental Large
Can any of the company-specific risk be diversified away by investing in both Emerging Markets and Fundamental Large 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 Fundamental Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerging Markets Portfolio and Fundamental Large Cap, you can compare the effects of market volatilities on Emerging Markets and Fundamental Large 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 Fundamental Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and Fundamental Large.
Diversification Opportunities for Emerging Markets and Fundamental Large
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Emerging and FUNDAMENTAL is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Portfolio and Fundamental Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fundamental Large Cap 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 Portfolio are associated (or correlated) with Fundamental Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fundamental Large Cap has no effect on the direction of Emerging Markets i.e., Emerging Markets and Fundamental Large go up and down completely randomly.
Pair Corralation between Emerging Markets and Fundamental Large
Assuming the 90 days horizon Emerging Markets is expected to generate 12.1 times less return on investment than Fundamental Large. In addition to that, Emerging Markets is 1.26 times more volatile than Fundamental Large Cap. It trades about 0.01 of its total potential returns per unit of risk. Fundamental Large Cap is currently generating about 0.19 per unit of volatility. If you would invest 7,583 in Fundamental Large Cap on September 3, 2024 and sell it today you would earn a total of 673.00 from holding Fundamental Large Cap or generate 8.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerging Markets Portfolio vs. Fundamental Large Cap
Performance |
| Timeline |
| Emerging Markets Por |
| Fundamental Large Cap |
Emerging Markets and Fundamental Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerging Markets and Fundamental Large
The main advantage of trading using opposite Emerging Markets and Fundamental Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Markets position performs unexpectedly, Fundamental Large 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 Fundamental Large will offset losses from the drop in Fundamental Large's long position.| Emerging Markets vs. Fundamental Large Cap | Emerging Markets vs. Jhancock Disciplined Value | Emerging Markets vs. Qs Large Cap | Emerging Markets vs. Dodge Cox Stock |
| Fundamental Large vs. Vanguard Total Stock | Fundamental Large vs. Vanguard 500 Index | Fundamental Large vs. Vanguard Total Stock | Fundamental Large vs. Vanguard Total Stock |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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