Correlation Between Johcm Emerging and Ariel International

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

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

Diversification Opportunities for Johcm Emerging and Ariel International

0.91

Correlation Coefficient

Johcm Emerging  Ariel International

Almost no diversification

The 3 months correlation between Johcm and Ariel is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Johcm Emerging Markets and Ariel International Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ariel International and Johcm 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 Johcm Emerging Markets are associated (or correlated) with Ariel International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ariel International has no effect on the direction of Johcm Emerging i.e., Johcm Emerging and Ariel International go up and down completely randomly.

Pair Corralation between Johcm Emerging and Ariel International

Assuming the 90 days horizon Johcm Emerging is expected to generate 1.29 times less return on investment than Ariel International. In addition to that, Johcm Emerging is 1.07 times more volatile than Ariel International Fund. It trades about 0.22 of its total potential returns per unit of risk. Ariel International Fund is currently generating about 0.31 per unit of volatility. If you would invest  1,478  in Ariel International Fund on November 27, 2024 and sell it today you would earn a total of  84.00  from holding Ariel International Fund or generate 5.68% return on investment over 90 days.

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

Johcm Emerging Markets  vs.  Ariel International Fund

Johcm Emerging Markets

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Johcm Emerging Markets are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Johcm Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ariel International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ariel International Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ariel International may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Johcm Emerging and Ariel International

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

The idea behind Johcm Emerging Markets and Ariel International 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.