Correlation Between Parametric Emerging and Amana Developing

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Can any of the company-specific risk be diversified away by investing in both Parametric Emerging and Amana Developing 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 Parametric Emerging and Amana Developing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Parametric Emerging Markets and Amana Developing World, you can compare the effects of market volatilities on Parametric Emerging and Amana Developing 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 Parametric Emerging with a short position of Amana Developing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Parametric Emerging and Amana Developing.

Diversification Opportunities for Parametric Emerging and Amana Developing

0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Parametric and Amana is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Parametric Emerging Markets and Amana Developing World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amana Developing World and Parametric 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 Parametric Emerging Markets are associated (or correlated) with Amana Developing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amana Developing World has no effect on the direction of Parametric Emerging i.e., Parametric Emerging and Amana Developing go up and down completely randomly.

Pair Corralation between Parametric Emerging and Amana Developing

Assuming the 90 days horizon Parametric Emerging is expected to generate 1.02 times less return on investment than Amana Developing. But when comparing it to its historical volatility, Parametric Emerging Markets is 1.18 times less risky than Amana Developing. It trades about 0.06 of its potential returns per unit of risk. Amana Developing World is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,350  in Amana Developing World on September 6, 2024 and sell it today you would earn a total of  29.00  from holding Amana Developing World or generate 2.15% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Parametric Emerging Markets  vs.  Amana Developing World

 Performance 
       Timeline  
Parametric Emerging 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Parametric Emerging Markets are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Parametric Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Amana Developing World 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Amana Developing World are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Amana Developing is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Parametric Emerging and Amana Developing Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Parametric Emerging and Amana Developing

The main advantage of trading using opposite Parametric Emerging and Amana Developing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Parametric Emerging position performs unexpectedly, Amana Developing 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 Amana Developing will offset losses from the drop in Amana Developing's long position.
The idea behind Parametric Emerging Markets and Amana Developing World 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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