Correlation Between Extended Market and Ep Emerging
Can any of the company-specific risk be diversified away by investing in both Extended Market and Ep 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 Extended Market and Ep Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Extended Market Index and Ep Emerging Markets, you can compare the effects of market volatilities on Extended Market and Ep 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 Extended Market with a short position of Ep Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extended Market and Ep Emerging.
Diversification Opportunities for Extended Market and Ep Emerging
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Extended and EPASX is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Extended Market Index and Ep Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ep Emerging Markets and Extended Market 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 Extended Market Index are associated (or correlated) with Ep Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ep Emerging Markets has no effect on the direction of Extended Market i.e., Extended Market and Ep Emerging go up and down completely randomly.
Pair Corralation between Extended Market and Ep Emerging
Assuming the 90 days horizon Extended Market Index is expected to generate 1.55 times more return on investment than Ep Emerging. However, Extended Market is 1.55 times more volatile than Ep Emerging Markets. It trades about 0.06 of its potential returns per unit of risk. Ep Emerging Markets is currently generating about 0.03 per unit of risk. If you would invest 1,867 in Extended Market Index on August 30, 2024 and sell it today you would earn a total of 646.00 from holding Extended Market Index or generate 34.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Extended Market Index vs. Ep Emerging Markets
Performance |
| Timeline |
| Extended Market Index |
| Ep Emerging Markets |
Extended Market and Ep Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extended Market and Ep Emerging
The main advantage of trading using opposite Extended Market and Ep Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extended Market position performs unexpectedly, Ep 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 Ep Emerging will offset losses from the drop in Ep Emerging's long position.| Extended Market vs. Queens Road Small | Extended Market vs. Boston Partners Small | Extended Market vs. Hennessy Nerstone Mid | Extended Market vs. Lord Abbett Small |
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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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