Correlation Between California Bond and Ashmore Emerging
Can any of the company-specific risk be diversified away by investing in both California Bond and Ashmore Emerging 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 California Bond and Ashmore Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between California Bond Fund and Ashmore Emerging Markets, you can compare the effects of market volatilities on California Bond and Ashmore Emerging 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 California Bond with a short position of Ashmore Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Bond and Ashmore Emerging.
Diversification Opportunities for California Bond and Ashmore Emerging
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between California and Ashmore is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund and Ashmore Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashmore Emerging Markets and California Bond 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 California Bond Fund are associated (or correlated) with Ashmore Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashmore Emerging Markets has no effect on the direction of California Bond i.e., California Bond and Ashmore Emerging go up and down completely randomly.
Pair Corralation between California Bond and Ashmore Emerging
Assuming the 90 days horizon California Bond is expected to generate 1.21 times less return on investment than Ashmore Emerging. But when comparing it to its historical volatility, California Bond Fund is 1.62 times less risky than Ashmore Emerging. It trades about 0.13 of its potential returns per unit of risk. Ashmore Emerging Markets is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 473.00 in Ashmore Emerging Markets on September 1, 2024 and sell it today you would earn a total of 22.00 from holding Ashmore Emerging Markets or generate 4.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
California Bond Fund vs. Ashmore Emerging Markets
Performance |
| Timeline |
| California Bond |
| Ashmore Emerging Markets |
California Bond and Ashmore Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Bond and Ashmore Emerging
The main advantage of trading using opposite California Bond and Ashmore Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Bond position performs unexpectedly, Ashmore Emerging 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 Ashmore Emerging will offset losses from the drop in Ashmore Emerging's long position.| California Bond vs. Income Fund Income | California Bond vs. Usaa Nasdaq 100 | California Bond vs. Intermediate Term Bond Fund | California Bond vs. Usaa Intermediate Term |
| Ashmore Emerging vs. Ashmore Emerging Markets | Ashmore Emerging vs. Ashmore Emerging Markets | Ashmore Emerging vs. Ashmore Emerging Markets | Ashmore Emerging vs. Ashmore Emerging Markets |
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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