Correlation Between International Emerging and Real Estate
Can any of the company-specific risk be diversified away by investing in both International Emerging and Real Estate 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 International Emerging and Real Estate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Emerging Markets and Real Estate Securities, you can compare the effects of market volatilities on International Emerging and Real Estate 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 International Emerging with a short position of Real Estate. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Emerging and Real Estate.
Diversification Opportunities for International Emerging and Real Estate
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between International and Real is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding International Emerging Markets and Real Estate Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Estate Securities and International Emerging 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 International Emerging Markets are associated (or correlated) with Real Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Estate Securities has no effect on the direction of International Emerging i.e., International Emerging and Real Estate go up and down completely randomly.
Pair Corralation between International Emerging and Real Estate
Assuming the 90 days horizon International Emerging is expected to generate 1.52 times less return on investment than Real Estate. But when comparing it to its historical volatility, International Emerging Markets is 1.04 times less risky than Real Estate. It trades about 0.04 of its potential returns per unit of risk. Real Estate Securities is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,732 in Real Estate Securities on August 25, 2024 and sell it today you would earn a total of 308.00 from holding Real Estate Securities or generate 11.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Emerging Markets vs. Real Estate Securities
Performance |
| Timeline |
| International Emerging |
| Real Estate Securities |
International Emerging and Real Estate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Emerging and Real Estate
The main advantage of trading using opposite International Emerging and Real Estate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Emerging position performs unexpectedly, Real Estate 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 Estate will offset losses from the drop in Real Estate's long position.| International Emerging vs. Dunham High Yield | International Emerging vs. Lord Abbett High | International Emerging vs. Pace High Yield | International Emerging vs. Pace High Yield |
| Real Estate vs. Midcap Fund Class | Real Estate vs. Diversified International Fund | Real Estate vs. International Emerging Markets | Real Estate vs. Largecap Sp 500 |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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