Correlation Between Avantis Emerging and Avantis All

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

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

Diversification Opportunities for Avantis Emerging and Avantis All

-0.17

Correlation Coefficient

Avantis Emerging  Avantis All

Good diversification

The 3 months correlation between Avantis and Avantis is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Emerging Markets and Avantis All Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis All Equity and Avantis Emerging 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 Avantis Emerging Markets are associated (or correlated) with Avantis All. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis All Equity has no effect on the direction of Avantis Emerging i.e., Avantis Emerging and Avantis All go up and down completely randomly.

Pair Corralation between Avantis Emerging and Avantis All

Given the investment horizon of 90 days Avantis Emerging Markets is expected to generate 0.98 times more return on investment than Avantis All. However, Avantis Emerging Markets is 1.02 times less risky than Avantis All. It trades about 0.05 of its potential returns per unit of risk. Avantis All Equity is currently generating about -0.03 per unit of risk. If you would invest  4,628  in Avantis Emerging Markets on December 29, 2024 and sell it today you would earn a total of  113.00  from holding Avantis Emerging Markets or generate 2.44% return on investment over 90 days.

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

Avantis Emerging Markets  vs.  Avantis All Equity

Avantis Emerging Markets

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis Emerging Markets are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Avantis Emerging is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Avantis All Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avantis All Equity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Avantis All is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Avantis Emerging and Avantis All

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

The idea behind Avantis Emerging Markets and Avantis All Equity 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.