Correlation Between Ariel International and Pzena Emerging

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

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

Diversification Opportunities for Ariel International and Pzena Emerging

0.98

Correlation Coefficient

Ariel International  Pzena Emerging

Almost no diversification

The 3 months correlation between Ariel and Pzena is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Ariel International Fund and Pzena Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pzena Emerging Markets and Ariel International 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 Ariel International Fund are associated (or correlated) with Pzena Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pzena Emerging Markets has no effect on the direction of Ariel International i.e., Ariel International and Pzena Emerging go up and down completely randomly.

Pair Corralation between Ariel International and Pzena Emerging

Assuming the 90 days horizon Ariel International Fund is expected to generate 1.22 times more return on investment than Pzena Emerging. However, Ariel International is 1.22 times more volatile than Pzena Emerging Markets. It trades about 0.21 of its potential returns per unit of risk. Pzena Emerging Markets is currently generating about 0.15 per unit of risk. If you would invest  1,413  in Ariel International Fund on December 28, 2024 and sell it today you would earn a total of  178.00  from holding Ariel International Fund or generate 12.6% return on investment over 90 days.

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

Ariel International Fund  vs.  Pzena Emerging Markets

Ariel International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ariel International Fund are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ariel International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pzena Emerging Markets

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pzena Emerging Markets are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Pzena Emerging may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ariel International and Pzena Emerging

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

The idea behind Ariel International Fund and Pzena 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.