Correlation Between Emerging Markets and Capital Growth
Can any of the company-specific risk be diversified away by investing in both Emerging Markets and Capital 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 Capital 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 Capital Growth Fund, you can compare the effects of market volatilities on Emerging Markets and Capital 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 Capital Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and Capital Growth.
Diversification Opportunities for Emerging Markets and Capital Growth
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Emerging and Capital is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Fund and Capital Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital 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 Capital Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Growth has no effect on the direction of Emerging Markets i.e., Emerging Markets and Capital Growth go up and down completely randomly.
Pair Corralation between Emerging Markets and Capital Growth
Assuming the 90 days horizon Emerging Markets Fund is expected to under-perform the Capital Growth. In addition to that, Emerging Markets is 1.27 times more volatile than Capital Growth Fund. It trades about -0.23 of its total potential returns per unit of risk. Capital Growth Fund is currently generating about 0.27 per unit of volatility. If you would invest 1,423 in Capital Growth Fund on September 3, 2024 and sell it today you would earn a total of 47.00 from holding Capital Growth Fund or generate 3.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerging Markets Fund vs. Capital Growth Fund
Performance |
| Timeline |
| Emerging Markets |
| Capital Growth |
Emerging Markets and Capital Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerging Markets and Capital Growth
The main advantage of trading using opposite Emerging Markets and Capital Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Markets position performs unexpectedly, Capital 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 Capital Growth will offset losses from the drop in Capital Growth's long position.| Emerging Markets vs. The Gabelli Small | Emerging Markets vs. Small Cap Stock | Emerging Markets vs. Blackrock Sm Cap | Emerging Markets vs. T Rowe Price |
| Capital Growth vs. American Funds Capital | Capital Growth vs. American Funds Capital | Capital Growth vs. Capital World Growth | Capital Growth vs. Capital World 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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