Correlation Between Emerging Economies and Foreign Value
Can any of the company-specific risk be diversified away by investing in both Emerging Economies and Foreign Value 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 Economies and Foreign Value into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerging Economies Fund and Foreign Value Fund, you can compare the effects of market volatilities on Emerging Economies and Foreign Value 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 Economies with a short position of Foreign Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Economies and Foreign Value.
Diversification Opportunities for Emerging Economies and Foreign Value
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Emerging and Foreign is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Economies Fund and Foreign Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foreign Value and Emerging Economies 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 Economies Fund are associated (or correlated) with Foreign Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foreign Value has no effect on the direction of Emerging Economies i.e., Emerging Economies and Foreign Value go up and down completely randomly.
Pair Corralation between Emerging Economies and Foreign Value
Assuming the 90 days horizon Emerging Economies Fund is expected to generate 1.31 times more return on investment than Foreign Value. However, Emerging Economies is 1.31 times more volatile than Foreign Value Fund. It trades about 0.29 of its potential returns per unit of risk. Foreign Value Fund is currently generating about 0.26 per unit of risk. If you would invest 627.00 in Emerging Economies Fund on April 24, 2025 and sell it today you would earn a total of 88.00 from holding Emerging Economies Fund or generate 14.04% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Emerging Economies Fund vs. Foreign Value Fund
Performance |
Timeline |
Emerging Economies |
Foreign Value |
Emerging Economies and Foreign Value Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Emerging Economies and Foreign Value
The main advantage of trading using opposite Emerging Economies and Foreign Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Economies position performs unexpectedly, Foreign Value 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 Foreign Value will offset losses from the drop in Foreign Value's long position.Emerging Economies vs. Qs Global Equity | Emerging Economies vs. Ab E Opportunities | Emerging Economies vs. Century Small Cap | Emerging Economies vs. Vanguard Global Equity |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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