Correlation Between Barings Active and Barings Emerging

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

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

Diversification Opportunities for Barings Active and Barings Emerging

0.84

Correlation Coefficient

Barings Active  Barings Emerging

Very poor diversification

The 3 months correlation between Barings and Barings is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Barings Active Short and Barings Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barings Emerging Markets and Barings Active 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 Barings Active Short are associated (or correlated) with Barings Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barings Emerging Markets has no effect on the direction of Barings Active i.e., Barings Active and Barings Emerging go up and down completely randomly.

Pair Corralation between Barings Active and Barings Emerging

Assuming the 90 days horizon Barings Active is expected to generate 1.38 times less return on investment than Barings Emerging. But when comparing it to its historical volatility, Barings Active Short is 2.67 times less risky than Barings Emerging. It trades about 0.16 of its potential returns per unit of risk. Barings Emerging Markets is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  735.00  in Barings Emerging Markets on December 5, 2024 and sell it today you would earn a total of  23.00  from holding Barings Emerging Markets or generate 3.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.19%
Values	Daily Returns

Barings Active Short  vs.  Barings Emerging Markets

Barings Active Short

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Barings Active Short are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Barings Active is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Barings Emerging Markets

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Barings Emerging Markets are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Barings 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 Barings Active and Barings Emerging

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

The idea behind Barings Active Short and Barings 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.