Correlation Between Eafe Fund and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Eafe Fund and Emerging Markets 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 Eafe Fund and Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Eafe Fund and The Emerging Markets, you can compare the effects of market volatilities on Eafe Fund and Emerging Markets 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 Eafe Fund with a short position of Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eafe Fund and Emerging Markets.
Diversification Opportunities for Eafe Fund and Emerging Markets
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eafe and Emerging is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding The Eafe Fund and The Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets and Eafe Fund 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 Eafe Fund are associated (or correlated) with Emerging Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets has no effect on the direction of Eafe Fund i.e., Eafe Fund and Emerging Markets go up and down completely randomly.
Pair Corralation between Eafe Fund and Emerging Markets
Assuming the 90 days horizon The Eafe Fund is expected to under-perform the Emerging Markets. In addition to that, Eafe Fund is 1.6 times more volatile than The Emerging Markets. It trades about 0.0 of its total potential returns per unit of risk. The Emerging Markets is currently generating about 0.01 per unit of volatility. If you would invest 2,004 in The Emerging Markets on December 2, 2024 and sell it today you would earn a total of 11.00 from holding The Emerging Markets or generate 0.55% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
The Eafe Fund vs. The Emerging Markets
Performance |
Timeline |
Eafe Fund |
Emerging Markets |
Eafe Fund and Emerging Markets Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Eafe Fund and Emerging Markets
The main advantage of trading using opposite Eafe Fund and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eafe Fund position performs unexpectedly, Emerging Markets 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 Emerging Markets will offset losses from the drop in Emerging Markets' long position.Eafe Fund vs. T Rowe Price | Eafe Fund vs. Blackrock Smid Cap Growth | Eafe Fund vs. Nuveen Nwq Small Cap | Eafe Fund vs. Ashmore Emerging Markets |
Emerging Markets vs. Hartford Healthcare Hls | Emerging Markets vs. Putnam Global Health | Emerging Markets vs. Alphacentric Lifesci Healthcare | Emerging Markets vs. Eaton Vance Worldwide |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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