Correlation Between Parametric Emerging and Wasatch Emerging

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

Diversification Opportunities for Parametric Emerging and Wasatch Emerging

0.89
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Parametric and Wasatch is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Parametric Emerging Markets and Wasatch Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Emerging Markets 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 Wasatch Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch Emerging Markets has no effect on the direction of Parametric Emerging i.e., Parametric Emerging and Wasatch Emerging go up and down completely randomly.

Pair Corralation between Parametric Emerging and Wasatch Emerging

Assuming the 90 days horizon Parametric Emerging Markets is expected to generate 0.72 times more return on investment than Wasatch Emerging. However, Parametric Emerging Markets is 1.39 times less risky than Wasatch Emerging. It trades about 0.06 of its potential returns per unit of risk. Wasatch Emerging Markets is currently generating about 0.03 per unit of risk. If you would invest  1,441  in Parametric Emerging Markets on September 6, 2024 and sell it today you would earn a total of  31.00  from holding Parametric Emerging Markets or generate 2.15% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy98.44%
ValuesDaily Returns

Parametric Emerging Markets  vs.  Wasatch Emerging Markets

 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.
Wasatch Emerging Markets 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Wasatch Emerging Markets are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Wasatch Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Parametric Emerging and Wasatch Emerging Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Parametric Emerging and Wasatch Emerging

The main advantage of trading using opposite Parametric Emerging and Wasatch Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Parametric Emerging position performs unexpectedly, Wasatch 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 Wasatch Emerging will offset losses from the drop in Wasatch Emerging's long position.
The idea behind Parametric Emerging Markets and Wasatch 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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