Correlation Between Investec Emerging and Western Asset
Can any of the company-specific risk be diversified away by investing in both Investec Emerging and Western Asset 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 Investec Emerging and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Investec Emerging Markets and Western Asset Smash, you can compare the effects of market volatilities on Investec Emerging and Western Asset 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 Investec Emerging with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investec Emerging and Western Asset.
Diversification Opportunities for Investec Emerging and Western Asset
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Investec and Western is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Investec Emerging Markets and Western Asset Smash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Smash and Investec Emerging 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 Investec Emerging Markets are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Smash has no effect on the direction of Investec Emerging i.e., Investec Emerging and Western Asset go up and down completely randomly.
Pair Corralation between Investec Emerging and Western Asset
Assuming the 90 days horizon Investec Emerging Markets is expected to generate 1.66 times more return on investment than Western Asset. However, Investec Emerging is 1.66 times more volatile than Western Asset Smash. It trades about 0.05 of its potential returns per unit of risk. Western Asset Smash is currently generating about 0.02 per unit of risk. If you would invest 875.00 in Investec Emerging Markets on September 14, 2024 and sell it today you would earn a total of 197.00 from holding Investec Emerging Markets or generate 22.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Investec Emerging Markets vs. Western Asset Smash
Performance |
| Timeline |
| Investec Emerging Markets |
| Western Asset Smash |
Investec Emerging and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Investec Emerging and Western Asset
The main advantage of trading using opposite Investec Emerging and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investec Emerging position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.| Investec Emerging vs. Rbc Emerging Markets | Investec Emerging vs. Locorr Market Trend | Investec Emerging vs. Calvert Developed Market | Investec Emerging vs. Ab All Market |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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