Correlation Between Emerging Markets and Pax Balanced
Can any of the company-specific risk be diversified away by investing in both Emerging Markets and Pax Balanced 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 Pax Balanced 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 Pax Balanced Fund, you can compare the effects of market volatilities on Emerging Markets and Pax Balanced 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 Pax Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and Pax Balanced.
Diversification Opportunities for Emerging Markets and Pax Balanced
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Emerging and Pax is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Portfolio and Pax Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pax Balanced 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 Pax Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pax Balanced has no effect on the direction of Emerging Markets i.e., Emerging Markets and Pax Balanced go up and down completely randomly.
Pair Corralation between Emerging Markets and Pax Balanced
Assuming the 90 days horizon Emerging Markets Portfolio is expected to generate 1.63 times more return on investment than Pax Balanced. However, Emerging Markets is 1.63 times more volatile than Pax Balanced Fund. It trades about 0.05 of its potential returns per unit of risk. Pax Balanced Fund is currently generating about 0.08 per unit of risk. If you would invest 1,813 in Emerging Markets Portfolio on August 26, 2024 and sell it today you would earn a total of 379.00 from holding Emerging Markets Portfolio or generate 20.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerging Markets Portfolio vs. Pax Balanced Fund
Performance |
| Timeline |
| Emerging Markets Por |
| Pax Balanced |
Emerging Markets and Pax Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerging Markets and Pax Balanced
The main advantage of trading using opposite Emerging Markets and Pax Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Markets position performs unexpectedly, Pax Balanced 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 Pax Balanced will offset losses from the drop in Pax Balanced's long position.| Emerging Markets vs. Emerging Markets Equity | Emerging Markets vs. Global Fixed Income | Emerging Markets vs. Global Fixed Income | Emerging Markets vs. Global Fixed Income |
| Pax Balanced vs. Rational Special Situations | Pax Balanced vs. Auer Growth Fund | Pax Balanced vs. Semiconductor Ultrasector Profund | Pax Balanced vs. Delaware Limited Term Diversified |
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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