Correlation Between Emerging Markets and Global Hard

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

By analyzing existing cross correlation between Emerging Markets Fund and Global Hard Assets, you can compare the effects of market volatilities on Emerging Markets and Global Hard 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 Global Hard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and Global Hard.

Diversification Opportunities for Emerging Markets and Global Hard

0.71

Correlation Coefficient

Emerging Markets  Global Hard

Poor diversification

The 3 months correlation between Emerging and Global is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Fund and Global Hard Assets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Hard Assets 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 Fund are associated (or correlated) with Global Hard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Hard Assets has no effect on the direction of Emerging Markets i.e., Emerging Markets and Global Hard go up and down completely randomly.

Pair Corralation between Emerging Markets and Global Hard

Assuming the 90 days horizon Emerging Markets is expected to generate 1.07 times less return on investment than Global Hard. In addition to that, Emerging Markets is 1.05 times more volatile than Global Hard Assets. It trades about 0.22 of its total potential returns per unit of risk. Global Hard Assets is currently generating about 0.25 per unit of volatility. If you would invest  3,843  in Global Hard Assets on May 1, 2025 and sell it today you would earn a total of  462.00  from holding Global Hard Assets or generate 12.02% return on investment over 90 days.

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

Emerging Markets Fund  vs.  Global Hard Assets

Emerging Markets

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Emerging Markets Fund 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 August 2025.

Global Hard Assets

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global Hard Assets are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Global Hard may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Emerging Markets and Global Hard

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

The idea behind Emerging Markets Fund and Global Hard Assets 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.