Correlation Between Equity Income and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Equity Income 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 Equity Income and Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Income Fund and Emerging Markets Debt, you can compare the effects of market volatilities on Equity Income 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 Equity Income with a short position of Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Income and Emerging Markets.
Diversification Opportunities for Equity Income and Emerging Markets
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Equity and Emerging is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Equity Income Fund 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 Equity Income 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 Equity Income Fund 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 Equity Income i.e., Equity Income and Emerging Markets go up and down completely randomly.
Pair Corralation between Equity Income and Emerging Markets
Assuming the 90 days horizon Equity Income Fund is expected to generate 2.05 times more return on investment than Emerging Markets. However, Equity Income is 2.05 times more volatile than Emerging Markets Debt. It trades about 0.06 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 868.00 in Equity Income Fund on September 12, 2024 and sell it today you would earn a total of 69.00 from holding Equity Income Fund or generate 7.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Equity Income Fund vs. Emerging Markets Debt
Performance |
| Timeline |
| Equity Income |
| Emerging Markets Debt |
Equity Income and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Income and Emerging Markets
The main advantage of trading using opposite Equity Income and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Income 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.| Equity Income vs. Highland Longshort Healthcare | Equity Income vs. Baron Health Care | Equity Income vs. Hartford Healthcare Hls | Equity Income vs. Health Biotchnology Portfolio |
| 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
Other Complementary Tools
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios |