Correlation Between Advantage Portfolio and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Advantage Portfolio 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 Advantage Portfolio and Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advantage Portfolio Class and Emerging Markets Equity, you can compare the effects of market volatilities on Advantage Portfolio 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 Advantage Portfolio with a short position of Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advantage Portfolio and Emerging Markets.
Diversification Opportunities for Advantage Portfolio and Emerging Markets
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Advantage and Emerging is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Advantage Portfolio Class and Emerging Markets Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets Equity and Advantage Portfolio 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 Advantage Portfolio Class 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 Equity has no effect on the direction of Advantage Portfolio i.e., Advantage Portfolio and Emerging Markets go up and down completely randomly.
Pair Corralation between Advantage Portfolio and Emerging Markets
If you would invest 1,341 in Emerging Markets Equity on November 8, 2024 and sell it today you would earn a total of 28.00 from holding Emerging Markets Equity or generate 2.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 5.0% |
| Values | Daily Returns |
Advantage Portfolio Class vs. Emerging Markets Equity
Performance |
| Timeline |
| Advantage Portfolio Class |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
| Emerging Markets Equity |
Advantage Portfolio and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advantage Portfolio and Emerging Markets
The main advantage of trading using opposite Advantage Portfolio and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advantage Portfolio 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.| Advantage Portfolio vs. California Municipal Portfolio | Advantage Portfolio vs. Intermediate Term Tax Free Bond | Advantage Portfolio vs. Blrc Sgy Mnp | Advantage Portfolio vs. Ishares Municipal Bond |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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