Correlation Between Vaneck Emerging and Unconstrained Emerging

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

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

Diversification Opportunities for Vaneck Emerging and Unconstrained Emerging

0.79

Correlation Coefficient

Vaneck Emerging  Unconstrained Emerging

Poor diversification

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

Pair Corralation between Vaneck Emerging and Unconstrained Emerging

Assuming the 90 days horizon Vaneck Emerging Markets is expected to under-perform the Unconstrained Emerging. In addition to that, Vaneck Emerging is 2.5 times more volatile than Unconstrained Emerging Markets. It trades about -0.03 of its total potential returns per unit of risk. Unconstrained Emerging Markets is currently generating about -0.01 per unit of volatility. If you would invest  535.00  in Unconstrained Emerging Markets on September 3, 2024 and sell it today you would lose (2.00) from holding Unconstrained Emerging Markets or give up 0.37% of portfolio value over 90 days.

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

Vaneck Emerging Markets  vs.  Unconstrained Emerging Markets

Vaneck Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vaneck Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vaneck Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Unconstrained Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Vaneck Emerging Markets and Unconstrained 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.

Check out your portfolio center.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.