Correlation Between Equity Growth and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Equity Growth 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 Equity Growth and Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Growth Strategy and Emerging Markets Fund, you can compare the effects of market volatilities on Equity Growth 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 Equity Growth with a short position of Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Growth and Emerging Markets.
Diversification Opportunities for Equity Growth and Emerging Markets
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Equity and Emerging is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Equity Growth Strategy and Emerging Markets Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets and Equity Growth 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 Equity Growth Strategy 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 has no effect on the direction of Equity Growth i.e., Equity Growth and Emerging Markets go up and down completely randomly.
Pair Corralation between Equity Growth and Emerging Markets
Assuming the 90 days horizon Equity Growth Strategy is expected to generate 0.69 times more return on investment than Emerging Markets. However, Equity Growth Strategy is 1.45 times less risky than Emerging Markets. It trades about 0.33 of its potential returns per unit of risk. Emerging Markets Fund is currently generating about -0.12 per unit of risk. If you would invest 1,574 in Equity Growth Strategy on September 1, 2024 and sell it today you would earn a total of 62.00 from holding Equity Growth Strategy or generate 3.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equity Growth Strategy vs. Emerging Markets Fund
Performance |
| Timeline |
| Equity Growth Strategy |
| Emerging Markets |
Equity Growth and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Growth and Emerging Markets
The main advantage of trading using opposite Equity Growth and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Growth 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.| Equity Growth vs. American Century High | Equity Growth vs. Prudential Short Duration | Equity Growth vs. Multi Manager High Yield | Equity Growth vs. Valic Company I |
| Emerging Markets vs. International Developed Markets | Emerging Markets vs. Global Real Estate | Emerging Markets vs. Global Real Estate | Emerging Markets vs. Global Real Estate |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
Other Complementary Tools
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets |