Correlation Between Science Technology and Brandes Emerging
Can any of the company-specific risk be diversified away by investing in both Science Technology and Brandes 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 Science Technology and Brandes Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Science Technology Fund and Brandes Emerging Markets, you can compare the effects of market volatilities on Science Technology and Brandes 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 Science Technology with a short position of Brandes Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Science Technology and Brandes Emerging.
Diversification Opportunities for Science Technology and Brandes Emerging
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Science and Brandes is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Science Technology Fund and Brandes Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brandes Emerging Markets and Science Technology 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 Science Technology Fund are associated (or correlated) with Brandes Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brandes Emerging Markets has no effect on the direction of Science Technology i.e., Science Technology and Brandes Emerging go up and down completely randomly.
Pair Corralation between Science Technology and Brandes Emerging
Assuming the 90 days horizon Science Technology Fund is expected to generate 1.99 times more return on investment than Brandes Emerging. However, Science Technology is 1.99 times more volatile than Brandes Emerging Markets. It trades about 0.14 of its potential returns per unit of risk. Brandes Emerging Markets is currently generating about -0.27 per unit of risk. If you would invest 2,752 in Science Technology Fund on August 30, 2024 and sell it today you would earn a total of 120.00 from holding Science Technology Fund or generate 4.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Science Technology Fund vs. Brandes Emerging Markets
Performance |
| Timeline |
| Science Technology |
| Brandes Emerging Markets |
Science Technology and Brandes Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Science Technology and Brandes Emerging
The main advantage of trading using opposite Science Technology and Brandes Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Science Technology position performs unexpectedly, Brandes 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 Brandes Emerging will offset losses from the drop in Brandes Emerging's long position.The idea behind Science Technology Fund and Brandes Emerging Markets pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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