Correlation Between Emerging Markets and Real Estate
Can any of the company-specific risk be diversified away by investing in both Emerging Markets and Real Estate 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 Real Estate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerging Markets Fund and Real Estate Fund, you can compare the effects of market volatilities on Emerging Markets and Real Estate 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 Real Estate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and Real Estate.
Diversification Opportunities for Emerging Markets and Real Estate
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Emerging and Real is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Fund and Real Estate Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Estate Fund 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 Fund are associated (or correlated) with Real Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Estate Fund has no effect on the direction of Emerging Markets i.e., Emerging Markets and Real Estate go up and down completely randomly.
Pair Corralation between Emerging Markets and Real Estate
Assuming the 90 days horizon Emerging Markets is expected to generate 1.29 times less return on investment than Real Estate. But when comparing it to its historical volatility, Emerging Markets Fund is 1.07 times less risky than Real Estate. It trades about 0.07 of its potential returns per unit of risk. Real Estate Fund is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,315 in Real Estate Fund on September 3, 2024 and sell it today you would earn a total of 514.00 from holding Real Estate Fund or generate 22.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerging Markets Fund vs. Real Estate Fund
Performance |
| Timeline |
| Emerging Markets |
| Real Estate Fund |
Emerging Markets and Real Estate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerging Markets and Real Estate
The main advantage of trading using opposite Emerging Markets and Real Estate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Markets position performs unexpectedly, Real Estate 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 Real Estate will offset losses from the drop in Real Estate's long position.| Emerging Markets vs. Heritage Fund Investor | Emerging Markets vs. Real Estate Fund | Emerging Markets vs. Global Growth Fund | Emerging Markets vs. Utilities Fund Investor |
| Real Estate vs. Qs Moderate Growth | Real Estate vs. Smallcap Growth Fund | Real Estate vs. L Abbett Growth | Real Estate vs. Eip Growth And |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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