Correlation Between Lsv Emerging and Msift High

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

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

Diversification Opportunities for Lsv Emerging and Msift High

0.69

Correlation Coefficient

Lsv Emerging  Msift High

Poor diversification

The 3 months correlation between Lsv and Msift is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Lsv Emerging Markets and Msift High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Msift High Yield and Lsv 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 Lsv Emerging Markets are associated (or correlated) with Msift High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Msift High Yield has no effect on the direction of Lsv Emerging i.e., Lsv Emerging and Msift High go up and down completely randomly.

Pair Corralation between Lsv Emerging and Msift High

Assuming the 90 days horizon Lsv Emerging Markets is expected to generate 3.86 times more return on investment than Msift High. However, Lsv Emerging is 3.86 times more volatile than Msift High Yield. It trades about 0.08 of its potential returns per unit of risk. Msift High Yield is currently generating about -0.06 per unit of risk. If you would invest  1,168  in Lsv Emerging Markets on December 4, 2024 and sell it today you would earn a total of  14.00  from holding Lsv Emerging Markets or generate 1.2% return on investment over 90 days.

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

Lsv Emerging Markets  vs.  Msift High Yield

Lsv Emerging Markets

Risk-Adjusted Performance

Very Weak

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

Msift High Yield

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Msift High Yield are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Msift High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lsv Emerging and Msift High

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

The idea behind Lsv Emerging Markets and Msift High Yield 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.