Correlation Between Morningstar Defensive and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Morningstar Defensive 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 Morningstar Defensive and Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Morningstar Defensive Bond and Emerging Markets Fund, you can compare the effects of market volatilities on Morningstar Defensive 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 Morningstar Defensive with a short position of Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morningstar Defensive and Emerging Markets.
Diversification Opportunities for Morningstar Defensive and Emerging Markets
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Morningstar and Emerging is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Morningstar Defensive Bond and Emerging Markets Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets and Morningstar Defensive 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 Morningstar Defensive Bond 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 Morningstar Defensive i.e., Morningstar Defensive and Emerging Markets go up and down completely randomly.
Pair Corralation between Morningstar Defensive and Emerging Markets
Assuming the 90 days horizon Morningstar Defensive is expected to generate 1.97 times less return on investment than Emerging Markets. But when comparing it to its historical volatility, Morningstar Defensive Bond is 7.62 times less risky than Emerging Markets. It trades about 0.34 of its potential returns per unit of risk. Emerging Markets Fund is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,146 in Emerging Markets Fund on November 8, 2024 and sell it today you would earn a total of 21.00 from holding Emerging Markets Fund or generate 1.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Morningstar Defensive Bond vs. Emerging Markets Fund
Performance |
| Timeline |
| Morningstar Defensive |
| Emerging Markets |
Morningstar Defensive and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Morningstar Defensive and Emerging Markets
The main advantage of trading using opposite Morningstar Defensive and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morningstar Defensive 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.| Morningstar Defensive vs. Dws Global Macro | Morningstar Defensive vs. Rbc Global Equity | Morningstar Defensive vs. Qs Global Equity | Morningstar Defensive vs. Slow Capital Growth |
| Emerging Markets vs. Fulcrum Diversified Absolute | Emerging Markets vs. Harbor Diversified International | Emerging Markets vs. Global Diversified Income | Emerging Markets vs. Wilmington Diversified Income |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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