Correlation Between Barings Emerging and Steward Small

Can any of the company-specific risk be diversified away by investing in both Barings Emerging and Steward Small 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 Steward Small 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 Steward Small Mid Cap, you can compare the effects of market volatilities on Barings Emerging and Steward Small 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 Steward Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barings Emerging and Steward Small.

Diversification Opportunities for Barings Emerging and Steward Small

-0.49

Correlation Coefficient

Barings Emerging  Steward Small

Very good diversification

The 3 months correlation between Barings and Steward is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Barings Emerging Markets and Steward Small Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steward Small Mid 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 Steward Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steward Small Mid has no effect on the direction of Barings Emerging i.e., Barings Emerging and Steward Small go up and down completely randomly.

Pair Corralation between Barings Emerging and Steward Small

Assuming the 90 days horizon Barings Emerging is expected to generate 305.0 times less return on investment than Steward Small. But when comparing it to its historical volatility, Barings Emerging Markets is 4.46 times less risky than Steward Small. It trades about 0.0 of its potential returns per unit of risk. Steward Small Mid Cap is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,418  in Steward Small Mid Cap on September 15, 2024 and sell it today you would earn a total of  17.00  from holding Steward Small Mid Cap or generate 1.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Barings Emerging Markets  vs.  Steward Small Mid Cap

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 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.

Steward Small Mid

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Steward Small Mid Cap are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Steward Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Barings Emerging and Steward Small

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

The idea behind Barings Emerging Markets and Steward Small Mid Cap 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..