Correlation Between Extended Market and Ashmore Emerging
Can any of the company-specific risk be diversified away by investing in both Extended Market 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 Extended Market and Ashmore 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 Ashmore Emerging Markets, you can compare the effects of market volatilities on Extended Market 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 Extended Market with a short position of Ashmore Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extended Market and Ashmore Emerging.
Diversification Opportunities for Extended Market and Ashmore Emerging
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Extended and Ashmore is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Extended Market Index 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 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 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 Extended Market i.e., Extended Market and Ashmore Emerging go up and down completely randomly.
Pair Corralation between Extended Market and Ashmore Emerging
Assuming the 90 days horizon Extended Market Index is expected to under-perform the Ashmore Emerging. In addition to that, Extended Market is 4.5 times more volatile than Ashmore Emerging Markets. It trades about -0.04 of its total potential returns per unit of risk. Ashmore Emerging Markets is currently generating about -0.06 per unit of volatility. If you would invest 849.00 in Ashmore Emerging Markets on October 31, 2024 and sell it today you would lose (16.00) from holding Ashmore Emerging Markets or give up 1.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Extended Market Index vs. Ashmore Emerging Markets
Performance |
| Timeline |
| Extended Market Index |
| Ashmore Emerging Markets |
Extended Market and Ashmore Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extended Market and Ashmore Emerging
The main advantage of trading using opposite Extended Market and Ashmore Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extended Market 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.| Extended Market vs. Tiaa Cref Inflation Link | Extended Market vs. Ab Bond Inflation | Extended Market vs. Guidepath Managed Futures | Extended Market vs. Guggenheim Managed Futures |
| Ashmore Emerging vs. Ab High Income | Ashmore Emerging vs. Aqr Risk Parity | Ashmore Emerging vs. Pace High Yield | Ashmore Emerging vs. Metropolitan West High |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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