Correlation Between Emerging Markets and Ultra Short-term
Can any of the company-specific risk be diversified away by investing in both Emerging Markets and Ultra Short-term 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 Ultra Short-term 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 Ultra Short Term Bond, you can compare the effects of market volatilities on Emerging Markets and Ultra Short-term 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 Ultra Short-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and Ultra Short-term.
Diversification Opportunities for Emerging Markets and Ultra Short-term
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Emerging and Ultra is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Fund and Ultra Short Term Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultra Short Term 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 Ultra Short-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultra Short Term has no effect on the direction of Emerging Markets i.e., Emerging Markets and Ultra Short-term go up and down completely randomly.
Pair Corralation between Emerging Markets and Ultra Short-term
Assuming the 90 days horizon Emerging Markets Fund is expected to generate 7.13 times more return on investment than Ultra Short-term. However, Emerging Markets is 7.13 times more volatile than Ultra Short Term Bond. It trades about 0.04 of its potential returns per unit of risk. Ultra Short Term Bond is currently generating about 0.2 per unit of risk. If you would invest 2,015 in Emerging Markets Fund on October 21, 2024 and sell it today you would earn a total of 11.00 from holding Emerging Markets Fund or generate 0.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerging Markets Fund vs. Ultra Short Term Bond
Performance |
| Timeline |
| Emerging Markets |
| Ultra Short Term |
Emerging Markets and Ultra Short-term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerging Markets and Ultra Short-term
The main advantage of trading using opposite Emerging Markets and Ultra Short-term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Markets position performs unexpectedly, Ultra Short-term 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 Ultra Short-term will offset losses from the drop in Ultra Short-term's long position.| Emerging Markets vs. The Gabelli Healthcare | Emerging Markets vs. Highland Longshort Healthcare | Emerging Markets vs. Lord Abbett Health | Emerging Markets vs. Delaware Healthcare Fund |
| Ultra Short-term vs. Capital Growth Fund | Ultra Short-term vs. Emerging Markets Fund | Ultra Short-term vs. High Income Fund | Ultra Short-term vs. International Fund International |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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