Correlation Between The Arbitrage and Ashmore Emerging

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

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

Diversification Opportunities for The Arbitrage and Ashmore Emerging

0.85

Correlation Coefficient

The Arbitrage  Ashmore Emerging

Very poor diversification

The 3 months correlation between The and Ashmore is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding The Arbitrage Credit and Ashmore Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashmore Emerging Markets and The Arbitrage 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 The Arbitrage Credit are associated (or correlated) with Ashmore Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashmore Emerging Markets has no effect on the direction of The Arbitrage i.e., The Arbitrage and Ashmore Emerging go up and down completely randomly.

Pair Corralation between The Arbitrage and Ashmore Emerging

Assuming the 90 days horizon The Arbitrage is expected to generate 1.59 times less return on investment than Ashmore Emerging. But when comparing it to its historical volatility, The Arbitrage Credit is 3.54 times less risky than Ashmore Emerging. It trades about 0.28 of its potential returns per unit of risk. Ashmore Emerging Markets is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  818.00  in Ashmore Emerging Markets on December 20, 2024 and sell it today you would earn a total of  20.00  from holding Ashmore Emerging Markets or generate 2.44% return on investment over 90 days.

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

The Arbitrage Credit  vs.  Ashmore Emerging Markets

Arbitrage Credit

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Arbitrage Credit are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, The Arbitrage is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ashmore Emerging Markets

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ashmore Emerging Markets are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Ashmore Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with The Arbitrage and Ashmore Emerging

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

The idea behind The Arbitrage Credit and Ashmore 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .