Correlation Between Ep Emerging and Simt Large

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

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

Diversification Opportunities for Ep Emerging and Simt Large

0.47

Correlation Coefficient

Ep Emerging  Simt Large

Very weak diversification

The 3 months correlation between EPEIX and Simt is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Ep Emerging Markets and Simt Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simt Large Cap and Ep 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 Ep Emerging Markets are associated (or correlated) with Simt Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simt Large Cap has no effect on the direction of Ep Emerging i.e., Ep Emerging and Simt Large go up and down completely randomly.

Pair Corralation between Ep Emerging and Simt Large

Assuming the 90 days horizon Ep Emerging Markets is expected to generate 0.25 times more return on investment than Simt Large. However, Ep Emerging Markets is 3.93 times less risky than Simt Large. It trades about -0.02 of its potential returns per unit of risk. Simt Large Cap is currently generating about -0.12 per unit of risk. If you would invest  1,005  in Ep Emerging Markets on December 1, 2024 and sell it today you would lose (7.00) from holding Ep Emerging Markets or give up 0.7% of portfolio value over 90 days.

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

Ep Emerging Markets  vs.  Simt Large Cap

Ep Emerging Markets

Risk-Adjusted Performance

Very Weak

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

Simt Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Simt Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Ep Emerging and Simt Large

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

The idea behind Ep Emerging Markets and Simt Large 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.