Correlation Between Ashmore Emerging and Basic Materials

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Can any of the company-specific risk be diversified away by investing in both Ashmore Emerging and Basic Materials 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 Ashmore Emerging and Basic Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ashmore Emerging Markets and Basic Materials Ultrasector, you can compare the effects of market volatilities on Ashmore Emerging and Basic Materials 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 Ashmore Emerging with a short position of Basic Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ashmore Emerging and Basic Materials.

Diversification Opportunities for Ashmore Emerging and Basic Materials

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Ashmore and Basic is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Ashmore Emerging Markets and Basic Materials Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Materials Ultr and Ashmore 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 Ashmore Emerging Markets are associated (or correlated) with Basic Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basic Materials Ultr has no effect on the direction of Ashmore Emerging i.e., Ashmore Emerging and Basic Materials go up and down completely randomly.

Pair Corralation between Ashmore Emerging and Basic Materials

Assuming the 90 days horizon Ashmore Emerging is expected to generate 11.64 times less return on investment than Basic Materials. But when comparing it to its historical volatility, Ashmore Emerging Markets is 7.43 times less risky than Basic Materials. It trades about 0.09 of its potential returns per unit of risk. Basic Materials Ultrasector is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  9,863  in Basic Materials Ultrasector on April 29, 2025 and sell it today you would earn a total of  1,291  from holding Basic Materials Ultrasector or generate 13.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Ashmore Emerging Markets  vs.  Basic Materials Ultrasector

 Performance 
       Timeline  
Ashmore Emerging Markets 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Ashmore Emerging Markets are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ashmore Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Basic Materials Ultr 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Basic Materials Ultrasector are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Basic Materials showed solid returns over the last few months and may actually be approaching a breakup point.

Ashmore Emerging and Basic Materials Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ashmore Emerging and Basic Materials

The main advantage of trading using opposite Ashmore Emerging and Basic Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ashmore Emerging position performs unexpectedly, Basic Materials 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 Basic Materials will offset losses from the drop in Basic Materials' long position.
The idea behind Ashmore Emerging Markets and Basic Materials Ultrasector 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.

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