Correlation Between Emerging Markets and Aggressive Growth
Can any of the company-specific risk be diversified away by investing in both Emerging Markets and Aggressive Growth 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 Aggressive Growth 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 Aggressive Growth Fund, you can compare the effects of market volatilities on Emerging Markets and Aggressive Growth 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 Aggressive Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and Aggressive Growth.
Diversification Opportunities for Emerging Markets and Aggressive Growth
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Emerging and Aggressive is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Fund and Aggressive Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Growth 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 Aggressive Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Growth has no effect on the direction of Emerging Markets i.e., Emerging Markets and Aggressive Growth go up and down completely randomly.
Pair Corralation between Emerging Markets and Aggressive Growth
Assuming the 90 days horizon Emerging Markets is expected to generate 3.13 times less return on investment than Aggressive Growth. But when comparing it to its historical volatility, Emerging Markets Fund is 1.4 times less risky than Aggressive Growth. It trades about 0.04 of its potential returns per unit of risk. Aggressive Growth Fund is currently generating about 0.1 of returns per unit of risk over similar time horizon. 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 |
Emerging Markets Fund vs. Aggressive Growth Fund
Performance |
| Timeline |
| Emerging Markets |
| Aggressive Growth |
Emerging Markets and Aggressive Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerging Markets and Aggressive Growth
The main advantage of trading using opposite Emerging Markets and Aggressive Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Markets position performs unexpectedly, Aggressive Growth 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 Aggressive Growth will offset losses from the drop in Aggressive Growth's long position.| Emerging Markets vs. Ab Centrated Growth | Emerging Markets vs. T Rowe Price | Emerging Markets vs. Ab Small Cap | Emerging Markets vs. Rational Defensive Growth |
| Aggressive Growth vs. Us Government Securities | Aggressive Growth vs. Virtus Seix Government | Aggressive Growth vs. Blackrock Government Bond | Aggressive Growth vs. Inverse Government Long |
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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