Correlation Between Avantis Short and Avantis Emerging

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

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

Diversification Opportunities for Avantis Short and Avantis Emerging

0.64

Correlation Coefficient

Avantis Short  Avantis Emerging

Poor diversification

The 3 months correlation between Avantis and Avantis is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Short Term Fixed and Avantis Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis Emerging Markets and Avantis Short 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 Short Term Fixed are associated (or correlated) with Avantis Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis Emerging Markets has no effect on the direction of Avantis Short i.e., Avantis Short and Avantis Emerging go up and down completely randomly.

Pair Corralation between Avantis Short and Avantis Emerging

Assuming the 90 days horizon Avantis Short is expected to generate 2.45 times less return on investment than Avantis Emerging. But when comparing it to its historical volatility, Avantis Short Term Fixed is 5.75 times less risky than Avantis Emerging. It trades about 0.17 of its potential returns per unit of risk. Avantis Emerging Markets is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,158  in Avantis Emerging Markets on December 29, 2024 and sell it today you would earn a total of  46.00  from holding Avantis Emerging Markets or generate 3.97% return on investment over 90 days.

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

Avantis Short Term Fixed  vs.  Avantis Emerging Markets

Avantis Short Term

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis Short Term Fixed are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Avantis Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Avantis Emerging Markets

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis Emerging Markets are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Avantis 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 Avantis Short and Avantis Emerging

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

The idea behind Avantis Short Term Fixed and Avantis 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.

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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.