Correlation Between Barings Emerging and Frost Total

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

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

Diversification Opportunities for Barings Emerging and Frost Total

0.8

Correlation Coefficient

Barings Emerging  Frost Total

Very poor diversification

The 3 months correlation between Barings and Frost is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Barings Emerging Markets and Frost Total Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frost Total Return and Barings 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 Barings Emerging Markets are associated (or correlated) with Frost Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frost Total Return has no effect on the direction of Barings Emerging i.e., Barings Emerging and Frost Total go up and down completely randomly.

Pair Corralation between Barings Emerging and Frost Total

Assuming the 90 days horizon Barings Emerging is expected to generate 1.54 times less return on investment than Frost Total. But when comparing it to its historical volatility, Barings Emerging Markets is 1.15 times less risky than Frost Total. It trades about 0.03 of its potential returns per unit of risk. Frost Total Return is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  976.00  in Frost Total Return on September 17, 2024 and sell it today you would earn a total of  2.00  from holding Frost Total Return or generate 0.2% return on investment over 90 days.

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

Barings Emerging Markets  vs.  Frost Total Return

Barings Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barings Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. 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.

Frost Total Return

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Frost Total Return has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Frost Total 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 Emerging and Frost Total

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

The idea behind Barings Emerging Markets and Frost Total Return 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.