Correlation Between Core Fixed and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Core Fixed 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 Core Fixed and Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Core Fixed Income and Emerging Markets Equity, you can compare the effects of market volatilities on Core Fixed 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 Core Fixed with a short position of Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Core Fixed and Emerging Markets.
Diversification Opportunities for Core Fixed and Emerging Markets
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Core and Emerging is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Core Fixed Income 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 Core Fixed 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 Core Fixed Income 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 Core Fixed i.e., Core Fixed and Emerging Markets go up and down completely randomly.
Pair Corralation between Core Fixed and Emerging Markets
Assuming the 90 days horizon Core Fixed Income is expected to generate 0.38 times more return on investment than Emerging Markets. However, Core Fixed Income is 2.63 times less risky than Emerging Markets. It trades about 0.1 of its potential returns per unit of risk. Emerging Markets Equity is currently generating about -0.17 per unit of risk. If you would invest 679.00 in Core Fixed Income on September 12, 2024 and sell it today you would earn a total of 4.00 from holding Core Fixed Income or generate 0.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Core Fixed Income vs. Emerging Markets Equity
Performance |
| Timeline |
| Core Fixed Income |
| Emerging Markets Equity |
Core Fixed and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Core Fixed and Emerging Markets
The main advantage of trading using opposite Core Fixed and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Core Fixed 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.| Core Fixed vs. Aqr Large Cap | Core Fixed vs. Cb Large Cap | Core Fixed vs. Qs Large Cap | Core Fixed vs. Lord Abbett Affiliated |
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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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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