Correlation Between Ep Emerging and Government Securities

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

Diversification Opportunities for Ep Emerging and Government Securities

0.67

Correlation Coefficient

Ep Emerging  Government Securities

Poor diversification

The 3 months correlation between EPEIX and Government is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Ep Emerging Markets and Government Securities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Government Securities 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 Government Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Government Securities has no effect on the direction of Ep Emerging i.e., Ep Emerging and Government Securities go up and down completely randomly.

Pair Corralation between Ep Emerging and Government Securities

Assuming the 90 days horizon Ep Emerging is expected to generate 1.75 times less return on investment than Government Securities. In addition to that, Ep Emerging is 2.14 times more volatile than Government Securities Fund. It trades about 0.01 of its total potential returns per unit of risk. Government Securities Fund is currently generating about 0.03 per unit of volatility. If you would invest  838.00  in Government Securities Fund on October 4, 2024 and sell it today you would earn a total of  35.00  from holding Government Securities Fund or generate 4.18% return on investment over 90 days.

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

Ep Emerging Markets  vs.  Government Securities Fund

Ep Emerging Markets

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Government Securities

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ep Emerging and Government Securities

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

The idea behind Ep Emerging Markets and Government Securities Fund 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..