Correlation Between Emerging Markets and Us Vector

Can any of the company-specific risk be diversified away by investing in both Emerging Markets and Us Vector 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 Emerging Markets and Us Vector into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Emerging Markets Targeted and Us Vector Equity, you can compare the effects of market volatilities on Emerging Markets and Us Vector 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 Emerging Markets with a short position of Us Vector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and Us Vector.

Diversification Opportunities for Emerging Markets and Us Vector

0.97

Correlation Coefficient

Emerging Markets  Us Vector

Almost no diversification

The 3 months correlation between Emerging and DFVEX is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Targeted and Us Vector Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Vector Equity and Emerging Markets 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 Emerging Markets Targeted are associated (or correlated) with Us Vector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Vector Equity has no effect on the direction of Emerging Markets i.e., Emerging Markets and Us Vector go up and down completely randomly.

Pair Corralation between Emerging Markets and Us Vector

Assuming the 90 days horizon Emerging Markets Targeted is expected to generate 0.79 times more return on investment than Us Vector. However, Emerging Markets Targeted is 1.27 times less risky than Us Vector. It trades about 0.41 of its potential returns per unit of risk. Us Vector Equity is currently generating about 0.26 per unit of risk. If you would invest  1,100  in Emerging Markets Targeted on April 25, 2025 and sell it today you would earn a total of  201.00  from holding Emerging Markets Targeted or generate 18.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

Emerging Markets Targeted  vs.  Us Vector Equity

Emerging Markets Targeted

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Emerging Markets Targeted are ranked lower than 32 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Emerging Markets showed solid returns over the last few months and may actually be approaching a breakup point.

Us Vector Equity

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Us Vector Equity are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Us Vector showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Emerging Markets and Us Vector

The main advantage of trading using opposite Emerging Markets and Us Vector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Markets position performs unexpectedly, Us Vector 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 Us Vector will offset losses from the drop in Us Vector's long position.

The idea behind Emerging Markets Targeted and Us Vector Equity pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.