Correlation Between Emerging Markets and Growth Portfolio
Can any of the company-specific risk be diversified away by investing in both Emerging Markets and Growth Portfolio 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 Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerging Markets Equity and Growth Portfolio Class, you can compare the effects of market volatilities on Emerging Markets and Growth Portfolio 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 Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and Growth Portfolio.
Diversification Opportunities for Emerging Markets and Growth Portfolio
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Emerging and Growth is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Equity and Growth Portfolio Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Portfolio Class 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 Equity are associated (or correlated) with Growth Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Portfolio Class has no effect on the direction of Emerging Markets i.e., Emerging Markets and Growth Portfolio go up and down completely randomly.
Pair Corralation between Emerging Markets and Growth Portfolio
Assuming the 90 days horizon Emerging Markets Equity is expected to generate 0.52 times more return on investment than Growth Portfolio. However, Emerging Markets Equity is 1.91 times less risky than Growth Portfolio. It trades about -0.03 of its potential returns per unit of risk. Growth Portfolio Class is currently generating about -0.19 per unit of risk. If you would invest 1,377 in Emerging Markets Equity on December 1, 2024 and sell it today you would lose (10.00) from holding Emerging Markets Equity or give up 0.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Emerging Markets Equity vs. Growth Portfolio Class
Performance |
| Timeline |
| Emerging Markets Equity |
| Growth Portfolio Class |
Emerging Markets and Growth Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerging Markets and Growth Portfolio
The main advantage of trading using opposite Emerging Markets and Growth Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Markets position performs unexpectedly, Growth Portfolio 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 Portfolio will offset losses from the drop in Growth Portfolio's long position.| Emerging Markets vs. World Energy Fund | Emerging Markets vs. Thrivent Natural Resources | Emerging Markets vs. Invesco Energy Fund | Emerging Markets vs. Alpsalerian Energy Infrastructure |
| Growth Portfolio vs. Prudential California Muni | Growth Portfolio vs. Inverse Government Long | Growth Portfolio vs. Aig Government Money | Growth Portfolio vs. Us Government Securities |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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