Correlation Between Stone Ridge and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Stone Ridge 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 Stone Ridge and Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stone Ridge Diversified and Emerging Markets Equity, you can compare the effects of market volatilities on Stone Ridge 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 Stone Ridge with a short position of Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stone Ridge and Emerging Markets.
Diversification Opportunities for Stone Ridge and Emerging Markets
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Stone and Emerging is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Stone Ridge Diversified and Emerging Markets Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets Equity and Stone Ridge 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 Stone Ridge Diversified 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 Equity has no effect on the direction of Stone Ridge i.e., Stone Ridge and Emerging Markets go up and down completely randomly.
Pair Corralation between Stone Ridge and Emerging Markets
Assuming the 90 days horizon Stone Ridge is expected to generate 1.48 times less return on investment than Emerging Markets. But when comparing it to its historical volatility, Stone Ridge Diversified is 4.51 times less risky than Emerging Markets. It trades about 0.12 of its potential returns per unit of risk. Emerging Markets Equity is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,356 in Emerging Markets Equity on October 25, 2024 and sell it today you would earn a total of 7.00 from holding Emerging Markets Equity or generate 0.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stone Ridge Diversified vs. Emerging Markets Equity
Performance |
| Timeline |
| Stone Ridge Diversified |
| Emerging Markets Equity |
Stone Ridge and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stone Ridge and Emerging Markets
The main advantage of trading using opposite Stone Ridge and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stone Ridge 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.| Stone Ridge vs. Blackrock Alternative Capital | Stone Ridge vs. Blackrock Systematic Multi Strategy | Stone Ridge vs. HUMANA INC | Stone Ridge vs. Aquagold International |
| Emerging Markets vs. Franklin Servative Allocation | Emerging Markets vs. Stone Ridge Diversified | Emerging Markets vs. Goldman Sachs Short Term | Emerging Markets vs. Tiaa Cref Lifestyle Servative |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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