Can any of the company-specific risk be diversified away by investing in both Vanguard Emerging and Shelton 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 Vanguard Emerging and Shelton Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Emerging Markets and Shelton Emerging Markets, you can compare the effects of market volatilities on Vanguard Emerging and Shelton 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 Vanguard Emerging with a short position of Shelton Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Emerging and Shelton Emerging.
Diversification Opportunities for Vanguard Emerging and Shelton Emerging
The 3 months correlation between Vanguard and Shelton is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Emerging Markets and Shelton Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shelton Emerging Markets and Vanguard 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 Vanguard Emerging Markets are associated (or correlated) with Shelton Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shelton Emerging Markets has no effect on the direction of Vanguard Emerging i.e., Vanguard Emerging and Shelton Emerging go up and down completely randomly.
Pair Corralation between Vanguard Emerging and Shelton Emerging
Assuming the 90 days horizon Vanguard Emerging Markets is expected to generate 0.76 times more return on investment than Shelton Emerging. However, Vanguard Emerging Markets is 1.32 times less risky than Shelton Emerging. It trades about 0.03 of its potential returns per unit of risk. Shelton Emerging Markets is currently generating about -0.08 per unit of risk. If you would invest 2,754 in Vanguard Emerging Markets on March 6, 2024 and sell it today you would earn a total of 10.00 from holding Vanguard Emerging Markets or generate 0.36% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Emerging Markets are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Vanguard Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Over the last 90 days Shelton Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Shelton Emerging is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.