Correlation Between Value Fund and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Value Fund 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 Value Fund and Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Value Fund A and Emerging Markets Debt, you can compare the effects of market volatilities on Value Fund 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 Value Fund with a short position of Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Value Fund and Emerging Markets.
Diversification Opportunities for Value Fund and Emerging Markets
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Value and Emerging is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Value Fund A and Emerging Markets Debt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets Debt and Value Fund 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 Value Fund A 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 Debt has no effect on the direction of Value Fund i.e., Value Fund and Emerging Markets go up and down completely randomly.
Pair Corralation between Value Fund and Emerging Markets
Assuming the 90 days horizon Value Fund A is expected to generate 2.4 times more return on investment than Emerging Markets. However, Value Fund is 2.4 times more volatile than Emerging Markets Debt. It trades about 0.05 of its potential returns per unit of risk. Emerging Markets Debt is currently generating about 0.05 per unit of risk. If you would invest 803.00 in Value Fund A on September 12, 2024 and sell it today you would earn a total of 61.00 from holding Value Fund A or generate 7.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Value Fund A vs. Emerging Markets Debt
Performance |
| Timeline |
| Value Fund A |
| Emerging Markets Debt |
Value Fund and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Value Fund and Emerging Markets
The main advantage of trading using opposite Value Fund and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value Fund 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.| Value Fund vs. Qs Large Cap | Value Fund vs. Transamerica Large Cap | Value Fund vs. Dunham Large Cap | Value Fund vs. Lord Abbett Affiliated |
| Emerging Markets vs. Emerging Markets Fund | Emerging Markets vs. Emerging Markets Fund | Emerging Markets vs. Emerging Markets Fund | Emerging Markets vs. Emerging Markets Fund |
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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