Correlation Between Aggressive Growth and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Aggressive Growth and Emerging Markets 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 Aggressive Growth and Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aggressive Growth Fund and Emerging Markets Fund, you can compare the effects of market volatilities on Aggressive Growth and Emerging Markets 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 Aggressive Growth with a short position of Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aggressive Growth and Emerging Markets.
Diversification Opportunities for Aggressive Growth and Emerging Markets
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Aggressive and Emerging is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Aggressive Growth Fund and Emerging Markets Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets and Aggressive Growth 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 Aggressive Growth Fund are associated (or correlated) with Emerging Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets has no effect on the direction of Aggressive Growth i.e., Aggressive Growth and Emerging Markets go up and down completely randomly.
Pair Corralation between Aggressive Growth and Emerging Markets
Assuming the 90 days horizon Aggressive Growth Fund is expected to generate 1.4 times more return on investment than Emerging Markets. However, Aggressive Growth is 1.4 times more volatile than Emerging Markets Fund. It trades about 0.1 of its potential returns per unit of risk. Emerging Markets Fund is currently generating about 0.04 per unit of risk. If you would invest 5,522 in Aggressive Growth Fund on August 29, 2024 and sell it today you would earn a total of 1,520 from holding Aggressive Growth Fund or generate 27.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aggressive Growth Fund vs. Emerging Markets Fund
Performance |
| Timeline |
| Aggressive Growth |
| Emerging Markets |
Aggressive Growth and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aggressive Growth and Emerging Markets
The main advantage of trading using opposite Aggressive Growth and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aggressive Growth position performs unexpectedly, Emerging Markets 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 Emerging Markets will offset losses from the drop in Emerging Markets' long position.| Aggressive Growth vs. Us Government Securities | Aggressive Growth vs. Virtus Seix Government | Aggressive Growth vs. Blackrock Government Bond | Aggressive Growth vs. Inverse Government Long |
| Emerging Markets vs. Ab Centrated Growth | Emerging Markets vs. T Rowe Price | Emerging Markets vs. Ab Small Cap | Emerging Markets vs. Rational Defensive Growth |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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