Correlation Between Investec Emerging and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Investec Emerging and Northern Lights 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 Northern Lights 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 Northern Lights, you can compare the effects of market volatilities on Investec Emerging and Northern Lights 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 Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investec Emerging and Northern Lights.
Diversification Opportunities for Investec Emerging and Northern Lights
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Investec and Northern is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Investec Emerging Markets and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights 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 Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of Investec Emerging i.e., Investec Emerging and Northern Lights go up and down completely randomly.
Pair Corralation between Investec Emerging and Northern Lights
Assuming the 90 days horizon Investec Emerging Markets is expected to under-perform the Northern Lights. In addition to that, Investec Emerging is 2.87 times more volatile than Northern Lights. It trades about -0.02 of its total potential returns per unit of risk. Northern Lights is currently generating about 0.1 per unit of volatility. If you would invest 2,956 in Northern Lights on September 13, 2024 and sell it today you would earn a total of 29.00 from holding Northern Lights or generate 0.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Investec Emerging Markets vs. Northern Lights
Performance |
| Timeline |
| Investec Emerging Markets |
| Northern Lights |
Investec Emerging and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Investec Emerging and Northern Lights
The main advantage of trading using opposite Investec Emerging and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investec Emerging position performs unexpectedly, Northern Lights 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 Northern Lights will offset losses from the drop in Northern Lights' long position.| Investec Emerging vs. Origin Emerging Markets | Investec Emerging vs. Franklin Emerging Market | Investec Emerging vs. Barings Emerging Markets | Investec Emerging vs. Shelton Emerging Markets |
| Northern Lights vs. Alpsalerian Energy Infrastructure | Northern Lights vs. Tortoise Energy Independence | Northern Lights vs. Energy Basic Materials | Northern Lights vs. Jennison Natural Resources |
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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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