Correlation Between Brandes Global and Brandes Emerging

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

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

Diversification Opportunities for Brandes Global and Brandes Emerging

0.48

Correlation Coefficient

Brandes Global  Brandes Emerging

Very weak diversification

The 3 months correlation between Brandes and BRANDES is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Brandes Global Equity and Brandes Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brandes Emerging Markets and Brandes Global 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 Brandes Global Equity are associated (or correlated) with Brandes Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brandes Emerging Markets has no effect on the direction of Brandes Global i.e., Brandes Global and Brandes Emerging go up and down completely randomly.

Pair Corralation between Brandes Global and Brandes Emerging

Assuming the 90 days horizon Brandes Global Equity is expected to generate 0.66 times more return on investment than Brandes Emerging. However, Brandes Global Equity is 1.51 times less risky than Brandes Emerging. It trades about 0.08 of its potential returns per unit of risk. Brandes Emerging Markets is currently generating about 0.01 per unit of risk. If you would invest  3,124  in Brandes Global Equity on September 5, 2024 and sell it today you would earn a total of  112.00  from holding Brandes Global Equity or generate 3.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Brandes Global Equity  vs.  Brandes Emerging Markets

Brandes Global Equity

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Brandes Global Equity are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Brandes Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Brandes Emerging Markets

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brandes Emerging Markets are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Brandes 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 Brandes Global and Brandes Emerging

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

The idea behind Brandes Global Equity and Brandes 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.