Correlation Between Pear Tree and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Pear Tree 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 Pear Tree and Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pear Tree Polaris and Emerging Markets Growth, you can compare the effects of market volatilities on Pear Tree 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 Pear Tree with a short position of Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pear Tree and Emerging Markets.
Diversification Opportunities for Pear Tree and Emerging Markets
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Pear and Emerging is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Pear Tree Polaris and Emerging Markets Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets Growth and Pear Tree 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 Pear Tree Polaris 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 Growth has no effect on the direction of Pear Tree i.e., Pear Tree and Emerging Markets go up and down completely randomly.
Pair Corralation between Pear Tree and Emerging Markets
Assuming the 90 days horizon Pear Tree Polaris is expected to generate 0.99 times more return on investment than Emerging Markets. However, Pear Tree Polaris is 1.01 times less risky than Emerging Markets. It trades about 0.05 of its potential returns per unit of risk. Emerging Markets Growth is currently generating about 0.03 per unit of risk. If you would invest 1,307 in Pear Tree Polaris on September 3, 2024 and sell it today you would earn a total of 253.00 from holding Pear Tree Polaris or generate 19.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pear Tree Polaris vs. Emerging Markets Growth
Performance |
| Timeline |
| Pear Tree Polaris |
| Emerging Markets Growth |
Pear Tree and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pear Tree and Emerging Markets
The main advantage of trading using opposite Pear Tree and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pear Tree 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.| Pear Tree vs. Pear Tree Polaris | Pear Tree vs. Pear Tree Polaris | Pear Tree vs. Artisan International Value | Pear Tree vs. Johcm International Select |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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