Correlation Between Prudential Government and Ashmore Emerging
Can any of the company-specific risk be diversified away by investing in both Prudential Government and Ashmore Emerging 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 Prudential Government and Ashmore Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Government Money and Ashmore Emerging Markets, you can compare the effects of market volatilities on Prudential Government and Ashmore Emerging 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 Prudential Government with a short position of Ashmore Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Government and Ashmore Emerging.
Diversification Opportunities for Prudential Government and Ashmore Emerging
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Prudential and Ashmore is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Government Money and Ashmore Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashmore Emerging Markets and Prudential Government 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 Prudential Government Money are associated (or correlated) with Ashmore Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashmore Emerging Markets has no effect on the direction of Prudential Government i.e., Prudential Government and Ashmore Emerging go up and down completely randomly.
Pair Corralation between Prudential Government and Ashmore Emerging
Assuming the 90 days horizon Prudential Government is expected to generate 15.75 times less return on investment than Ashmore Emerging. In addition to that, Prudential Government is 4.01 times more volatile than Ashmore Emerging Markets. It trades about 0.0 of its total potential returns per unit of risk. Ashmore Emerging Markets is currently generating about 0.18 per unit of volatility. If you would invest 778.00 in Ashmore Emerging Markets on September 2, 2024 and sell it today you would earn a total of 103.00 from holding Ashmore Emerging Markets or generate 13.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 88.91% |
| Values | Daily Returns |
Prudential Government Money vs. Ashmore Emerging Markets
Performance |
| Timeline |
| Prudential Government |
| Ashmore Emerging Markets |
Prudential Government and Ashmore Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Government and Ashmore Emerging
The main advantage of trading using opposite Prudential Government and Ashmore Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Government position performs unexpectedly, Ashmore Emerging 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 Ashmore Emerging will offset losses from the drop in Ashmore Emerging's long position.The idea behind Prudential Government Money and Ashmore Emerging Markets pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Ashmore Emerging vs. Qs Large Cap | Ashmore Emerging vs. M Large Cap | Ashmore Emerging vs. Fidelity Series 1000 | Ashmore Emerging vs. Qs Large Cap |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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