Correlation Between Select Us and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Select Us and Emerging Markets 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 Select Us and Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Select Equity Fund and Emerging Markets Fund, you can compare the effects of market volatilities on Select Us and Emerging Markets 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 Select Us with a short position of Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select Us and Emerging Markets.
Diversification Opportunities for Select Us and Emerging Markets
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Select and Emerging is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Select Equity Fund and Emerging Markets Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets and Select Us 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 Select Equity Fund are associated (or correlated) with Emerging Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets has no effect on the direction of Select Us i.e., Select Us and Emerging Markets go up and down completely randomly.
Pair Corralation between Select Us and Emerging Markets
Assuming the 90 days horizon Select Equity Fund is expected to under-perform the Emerging Markets. But the mutual fund apears to be less risky and, when comparing its historical volatility, Select Equity Fund is 1.13 times less risky than Emerging Markets. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Emerging Markets Fund is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,581 in Emerging Markets Fund on February 4, 2024 and sell it today you would earn a total of 32.00 from holding Emerging Markets Fund or generate 2.02% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Select Equity Fund vs. Emerging Markets Fund
Performance |
Timeline |
Select Equity |
Emerging Markets |
Select Us and Emerging Markets Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Select Us and Emerging Markets
The main advantage of trading using opposite Select Us and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select Us position performs unexpectedly, Emerging Markets 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 Emerging Markets will offset losses from the drop in Emerging Markets' long position.Select Us vs. Ab Global Risk | Select Us vs. Aqr Global Equity | Select Us vs. Franklin Mutual Global | Select Us vs. Morningstar Global Income |
Emerging Markets vs. Vanguard Emerging Markets | Emerging Markets vs. American Funds New | Emerging Markets vs. American Funds New | Emerging Markets vs. New World Fund |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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