Correlation Between Investec Emerging and Prudential Absolute
Can any of the company-specific risk be diversified away by investing in both Investec Emerging and Prudential Absolute 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 Prudential Absolute 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 Prudential Absolute Return, you can compare the effects of market volatilities on Investec Emerging and Prudential Absolute 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 Prudential Absolute. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investec Emerging and Prudential Absolute.
Diversification Opportunities for Investec Emerging and Prudential Absolute
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Investec and Prudential is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Investec Emerging Markets and Prudential Absolute Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Absolute 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 Prudential Absolute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Absolute has no effect on the direction of Investec Emerging i.e., Investec Emerging and Prudential Absolute go up and down completely randomly.
Pair Corralation between Investec Emerging and Prudential Absolute
Assuming the 90 days horizon Investec Emerging Markets is expected to generate 40.36 times more return on investment than Prudential Absolute. However, Investec Emerging is 40.36 times more volatile than Prudential Absolute Return. It trades about 0.06 of its potential returns per unit of risk. Prudential Absolute Return is currently generating about 0.22 per unit of risk. If you would invest 1,074 in Investec Emerging Markets on November 4, 2024 and sell it today you would earn a total of 11.00 from holding Investec Emerging Markets or generate 1.02% 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. Prudential Absolute Return
Performance |
| Timeline |
| Investec Emerging Markets |
| Prudential Absolute |
Investec Emerging and Prudential Absolute Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Investec Emerging and Prudential Absolute
The main advantage of trading using opposite Investec Emerging and Prudential Absolute positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investec Emerging position performs unexpectedly, Prudential Absolute 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 Prudential Absolute will offset losses from the drop in Prudential Absolute's long position.| Investec Emerging vs. Ab Bond Inflation | Investec Emerging vs. Ab Bond Inflation | Investec Emerging vs. Rbc Bluebay Emerging | Investec Emerging vs. Versatile Bond Portfolio |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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