Correlation Between Emerging Markets and Select Fund
Can any of the company-specific risk be diversified away by investing in both Emerging Markets and Select Fund 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 Select Fund 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 Select Fund Investor, you can compare the effects of market volatilities on Emerging Markets and Select Fund 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 Select Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and Select Fund.
Diversification Opportunities for Emerging Markets and Select Fund
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Emerging and Select is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Fund and Select Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Fund Investor 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 Select Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Fund Investor has no effect on the direction of Emerging Markets i.e., Emerging Markets and Select Fund go up and down completely randomly.
Pair Corralation between Emerging Markets and Select Fund
Assuming the 90 days horizon Emerging Markets Fund is expected to under-perform the Select Fund. But the mutual fund apears to be less risky and, when comparing its historical volatility, Emerging Markets Fund is 1.34 times less risky than Select Fund. The mutual fund trades about -0.17 of its potential returns per unit of risk. The Select Fund Investor is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 12,320 in Select Fund Investor on August 23, 2024 and sell it today you would earn a total of 172.00 from holding Select Fund Investor or generate 1.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerging Markets Fund vs. Select Fund Investor
Performance |
| Timeline |
| Emerging Markets |
| Select Fund Investor |
Emerging Markets and Select Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerging Markets and Select Fund
The main advantage of trading using opposite Emerging Markets and Select Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Markets position performs unexpectedly, Select Fund 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 Select Fund will offset losses from the drop in Select Fund'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 |
| Select Fund vs. Growth Fund Investor | Select Fund vs. Ultra Fund Investor | Select Fund vs. Heritage Fund Investor | Select Fund vs. International Growth 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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