Correlation Between Pace International and Ashmore Emerging
Can any of the company-specific risk be diversified away by investing in both Pace International 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 Pace International and Ashmore Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pace International Emerging and Ashmore Emerging Markets, you can compare the effects of market volatilities on Pace International 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 Pace International with a short position of Ashmore Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace International and Ashmore Emerging.
Diversification Opportunities for Pace International and Ashmore Emerging
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pace and Ashmore is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Pace International Emerging 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 Pace International 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 Pace International Emerging 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 Pace International i.e., Pace International and Ashmore Emerging go up and down completely randomly.
Pair Corralation between Pace International and Ashmore Emerging
Assuming the 90 days horizon Pace International is expected to generate 1.35 times less return on investment than Ashmore Emerging. In addition to that, Pace International is 4.15 times more volatile than Ashmore Emerging Markets. It trades about 0.03 of its total potential returns per unit of risk. Ashmore Emerging Markets is currently generating about 0.2 per unit of volatility. If you would invest 523.00 in Ashmore Emerging Markets on August 25, 2024 and sell it today you would earn a total of 52.00 from holding Ashmore Emerging Markets or generate 9.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pace International Emerging vs. Ashmore Emerging Markets
Performance |
| Timeline |
| Pace International |
| Ashmore Emerging Markets |
Pace International and Ashmore Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pace International and Ashmore Emerging
The main advantage of trading using opposite Pace International and Ashmore Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace International 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 Pace International Emerging 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.
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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