Correlation Between Emerging Markets and Absolute Convertible
Can any of the company-specific risk be diversified away by investing in both Emerging Markets and Absolute Convertible 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 Absolute Convertible 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 Absolute Convertible Arbitrage, you can compare the effects of market volatilities on Emerging Markets and Absolute Convertible 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 Absolute Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and Absolute Convertible.
Diversification Opportunities for Emerging Markets and Absolute Convertible
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Emerging and Absolute is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Fund and Absolute Convertible Arbitrage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Convertible 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 Absolute Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Convertible has no effect on the direction of Emerging Markets i.e., Emerging Markets and Absolute Convertible go up and down completely randomly.
Pair Corralation between Emerging Markets and Absolute Convertible
Assuming the 90 days horizon Emerging Markets Fund is expected to under-perform the Absolute Convertible. In addition to that, Emerging Markets is 15.49 times more volatile than Absolute Convertible Arbitrage. It trades about -0.14 of its total potential returns per unit of risk. Absolute Convertible Arbitrage is currently generating about 0.41 per unit of volatility. If you would invest 1,141 in Absolute Convertible Arbitrage on September 13, 2024 and sell it today you would earn a total of 10.00 from holding Absolute Convertible Arbitrage or generate 0.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerging Markets Fund vs. Absolute Convertible Arbitrage
Performance |
| Timeline |
| Emerging Markets |
| Absolute Convertible |
Emerging Markets and Absolute Convertible Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerging Markets and Absolute Convertible
The main advantage of trading using opposite Emerging Markets and Absolute Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Markets position performs unexpectedly, Absolute Convertible 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 Absolute Convertible will offset losses from the drop in Absolute Convertible's long position.| Emerging Markets vs. Capital Growth Fund | Emerging Markets vs. High Income Fund | Emerging Markets vs. International Fund International | Emerging Markets vs. Growth Income Fund |
| Absolute Convertible vs. Advent Claymore Convertible | Absolute Convertible vs. Fidelity Sai Convertible | Absolute Convertible vs. Virtus Convertible | Absolute Convertible vs. Putnam Convertible Incm Gwth |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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