Correlation Between Emerging Markets and International Core

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

By analyzing existing cross correlation between Emerging Markets Portfolio and International E Equity, you can compare the effects of market volatilities on Emerging Markets and International Core 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 International Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and International Core.

Diversification Opportunities for Emerging Markets and International Core

0.88

Correlation Coefficient

Emerging Markets  International Core

Very poor diversification

The 3 months correlation between Emerging and International is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Portfolio and International E Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International E 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 Portfolio are associated (or correlated) with International Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International E Equity has no effect on the direction of Emerging Markets i.e., Emerging Markets and International Core go up and down completely randomly.

Pair Corralation between Emerging Markets and International Core

Assuming the 90 days horizon Emerging Markets Portfolio is expected to generate 0.9 times more return on investment than International Core. However, Emerging Markets Portfolio is 1.11 times less risky than International Core. It trades about 0.22 of its potential returns per unit of risk. International E Equity is currently generating about 0.11 per unit of risk. If you would invest  2,079  in Emerging Markets Portfolio on July 2, 2025 and sell it today you would earn a total of  181.00  from holding Emerging Markets Portfolio or generate 8.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Emerging Markets Portfolio  vs.  International E Equity

Emerging Markets Por

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Emerging Markets Portfolio are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Emerging Markets may actually be approaching a critical reversion point that can send shares even higher in October 2025.

International E Equity

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in International E Equity are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, International Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Emerging Markets and International Core

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

The idea behind Emerging Markets Portfolio and International E 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.

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.