Correlation Between Emerging Markets and Multi Asset
Can any of the company-specific risk be diversified away by investing in both Emerging Markets and Multi Asset 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 Multi Asset 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 Multi Asset Real Return, you can compare the effects of market volatilities on Emerging Markets and Multi Asset 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 Multi Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and Multi Asset.
Diversification Opportunities for Emerging Markets and Multi Asset
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Emerging and Multi is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Fund and Multi Asset Real Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Asset Real 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 Multi Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Asset Real has no effect on the direction of Emerging Markets i.e., Emerging Markets and Multi Asset go up and down completely randomly.
Pair Corralation between Emerging Markets and Multi Asset
Assuming the 90 days horizon Emerging Markets Fund is expected to generate 0.48 times more return on investment than Multi Asset. However, Emerging Markets Fund is 2.09 times less risky than Multi Asset. It trades about -0.08 of its potential returns per unit of risk. Multi Asset Real Return is currently generating about -0.07 per unit of risk. If you would invest 1,129 in Emerging Markets Fund on September 22, 2024 and sell it today you would lose (14.00) from holding Emerging Markets Fund or give up 1.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerging Markets Fund vs. Multi Asset Real Return
Performance |
| Timeline |
| Emerging Markets |
| Multi Asset Real |
Emerging Markets and Multi Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerging Markets and Multi Asset
The main advantage of trading using opposite Emerging Markets and Multi Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Markets position performs unexpectedly, Multi Asset 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 Multi Asset will offset losses from the drop in Multi Asset'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 |
| Multi Asset vs. Mid Cap Value | Multi Asset vs. Equity Growth Fund | Multi Asset vs. Income Growth Fund | Multi Asset vs. Diversified Bond 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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