Correlation Between First Foundation and Emerging Markets

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

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

Diversification Opportunities for First Foundation and Emerging Markets

0.66

Correlation Coefficient

First Foundation  Emerging Markets

Poor diversification

The 3 months correlation between First and Emerging is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding First Foundation Fixed and The Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets and First Foundation 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 First Foundation Fixed are associated (or correlated) with Emerging Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets has no effect on the direction of First Foundation i.e., First Foundation and Emerging Markets go up and down completely randomly.

Pair Corralation between First Foundation and Emerging Markets

Assuming the 90 days horizon First Foundation is expected to generate 6.74 times less return on investment than Emerging Markets. But when comparing it to its historical volatility, First Foundation Fixed is 2.98 times less risky than Emerging Markets. It trades about 0.1 of its potential returns per unit of risk. The Emerging Markets is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  2,047  in The Emerging Markets on May 2, 2025 and sell it today you would earn a total of  234.00  from holding The Emerging Markets or generate 11.43% return on investment over 90 days.

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

First Foundation Fixed  vs.  The Emerging Markets

First Foundation Fixed

Risk-Adjusted Performance

OK

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

Emerging Markets

Risk-Adjusted Performance

Solid

Over the last 90 days The Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak technical and fundamental indicators, Emerging Markets may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with First Foundation and Emerging Markets

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

The idea behind First Foundation Fixed and The Emerging Markets 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.