Correlation Between Emerging Economies and Stock Index
Can any of the company-specific risk be diversified away by investing in both Emerging Economies and Stock Index 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 Stock Index 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 Stock Index Fund, you can compare the effects of market volatilities on Emerging Economies and Stock Index 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 Stock Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Economies and Stock Index.
Diversification Opportunities for Emerging Economies and Stock Index
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Emerging and Stock is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Economies Fund and Stock Index Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stock Index Fund 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 Stock Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stock Index Fund has no effect on the direction of Emerging Economies i.e., Emerging Economies and Stock Index go up and down completely randomly.
Pair Corralation between Emerging Economies and Stock Index
Assuming the 90 days horizon Emerging Economies is expected to generate 1.09 times less return on investment than Stock Index. In addition to that, Emerging Economies is 1.01 times more volatile than Stock Index Fund. It trades about 0.29 of its total potential returns per unit of risk. Stock Index Fund is currently generating about 0.32 per unit of volatility. If you would invest 5,410 in Stock Index Fund on April 24, 2025 and sell it today you would earn a total of 830.00 from holding Stock Index Fund or generate 15.34% 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. Stock Index Fund
Performance |
Timeline |
Emerging Economies |
Stock Index Fund |
Emerging Economies and Stock Index Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Emerging Economies and Stock Index
The main advantage of trading using opposite Emerging Economies and Stock Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Economies position performs unexpectedly, Stock Index 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 Stock Index will offset losses from the drop in Stock Index's long position.Emerging Economies vs. T Rowe Price | Emerging Economies vs. T Rowe Price | Emerging Economies vs. Jpmorgan Smartretirement 2035 | Emerging Economies vs. T Rowe Price |
Stock Index vs. Mid Cap Index | Stock Index vs. Mid Cap Strategic | Stock Index vs. Valic Company I | Stock Index vs. Valic Company I |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
Other Complementary Tools
Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. |