Correlation Between Emerging Markets and Real Return
Can any of the company-specific risk be diversified away by investing in both Emerging Markets and Real Return 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 Real Return into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerging Markets Bond and Real Return Fund, you can compare the effects of market volatilities on Emerging Markets and Real Return 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 Real Return. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and Real Return.
Diversification Opportunities for Emerging Markets and Real Return
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Emerging and Real is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Bond and Real Return Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Return Fund 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 Bond are associated (or correlated) with Real Return. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Return Fund has no effect on the direction of Emerging Markets i.e., Emerging Markets and Real Return go up and down completely randomly.
Pair Corralation between Emerging Markets and Real Return
Assuming the 90 days horizon Emerging Markets Bond is expected to generate 1.19 times more return on investment than Real Return. However, Emerging Markets is 1.19 times more volatile than Real Return Fund. It trades about 0.04 of its potential returns per unit of risk. Real Return Fund is currently generating about -0.05 per unit of risk. If you would invest 839.00 in Emerging Markets Bond on October 22, 2024 and sell it today you would earn a total of 6.00 from holding Emerging Markets Bond or generate 0.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerging Markets Bond vs. Real Return Fund
Performance |
| Timeline |
| Emerging Markets Bond |
| Real Return Fund |
Emerging Markets and Real Return Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerging Markets and Real Return
The main advantage of trading using opposite Emerging Markets and Real Return positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Markets position performs unexpectedly, Real Return 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 Real Return will offset losses from the drop in Real Return's long position.| Emerging Markets vs. Tax Managed Mid Small | Emerging Markets vs. Commodities Strategy Fund | Emerging Markets vs. T Rowe Price | Emerging Markets vs. Growth Fund Of |
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 Stocks Directory module to find actively traded stocks across global markets.
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