Correlation Between Barings Emerging and Mondrian Emerging

Can any of the company-specific risk be diversified away by investing in both Barings Emerging and Mondrian 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 Emerging and Mondrian Emerging 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 Mondrian Emerging Markets, you can compare the effects of market volatilities on Barings Emerging and Mondrian 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 Emerging with a short position of Mondrian Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barings Emerging and Mondrian Emerging.

Diversification Opportunities for Barings Emerging and Mondrian Emerging

0.79

Correlation Coefficient

Barings Emerging  Mondrian Emerging

Poor diversification

The 3 months correlation between Barings and Mondrian is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Barings Emerging Markets and Mondrian Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mondrian Emerging Markets 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 Mondrian Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mondrian Emerging Markets has no effect on the direction of Barings Emerging i.e., Barings Emerging and Mondrian Emerging go up and down completely randomly.

Pair Corralation between Barings Emerging and Mondrian Emerging

Assuming the 90 days horizon Barings Emerging is expected to generate 1.09 times less return on investment than Mondrian Emerging. But when comparing it to its historical volatility, Barings Emerging Markets is 2.8 times less risky than Mondrian Emerging. It trades about 0.09 of its potential returns per unit of risk. Mondrian Emerging Markets is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  752.00  in Mondrian Emerging Markets on December 2, 2024 and sell it today you would earn a total of  11.00  from holding Mondrian Emerging Markets or generate 1.46% return on investment over 90 days.

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

Barings Emerging Markets  vs.  Mondrian Emerging Markets

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 fundamental indicators, Barings Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mondrian Emerging Markets

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mondrian Emerging Markets are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Mondrian 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 Emerging and Mondrian Emerging

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

The idea behind Barings Emerging Markets and Mondrian 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.