Correlation Between Emerging Markets and Growth Strategy
Can any of the company-specific risk be diversified away by investing in both Emerging Markets and Growth Strategy 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 Growth Strategy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerging Markets Fund and Growth Strategy Fund, you can compare the effects of market volatilities on Emerging Markets and Growth Strategy 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 Growth Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and Growth Strategy.
Diversification Opportunities for Emerging Markets and Growth Strategy
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Emerging and Growth is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Fund and Growth Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Strategy 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 Fund are associated (or correlated) with Growth Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Strategy has no effect on the direction of Emerging Markets i.e., Emerging Markets and Growth Strategy go up and down completely randomly.
Pair Corralation between Emerging Markets and Growth Strategy
Assuming the 90 days horizon Emerging Markets is expected to generate 3.68 times less return on investment than Growth Strategy. In addition to that, Emerging Markets is 1.61 times more volatile than Growth Strategy Fund. It trades about 0.02 of its total potential returns per unit of risk. Growth Strategy Fund is currently generating about 0.1 per unit of volatility. If you would invest 1,113 in Growth Strategy Fund on September 1, 2024 and sell it today you would earn a total of 93.00 from holding Growth Strategy Fund or generate 8.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerging Markets Fund vs. Growth Strategy Fund
Performance |
| Timeline |
| Emerging Markets |
| Growth Strategy |
Emerging Markets and Growth Strategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerging Markets and Growth Strategy
The main advantage of trading using opposite Emerging Markets and Growth Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Markets position performs unexpectedly, Growth Strategy 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 Growth Strategy will offset losses from the drop in Growth Strategy's long position.| Emerging Markets vs. International Developed Markets | Emerging Markets vs. Global Real Estate | Emerging Markets vs. Global Real Estate | Emerging Markets vs. Global Real Estate |
| Growth Strategy vs. Enhanced Large Pany | Growth Strategy vs. Touchstone Large Cap | Growth Strategy vs. Strategic Allocation Aggressive | Growth Strategy vs. Alternative Asset Allocation |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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