Correlation Between Advantage Portfolio and Emerging Markets

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

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

Diversification Opportunities for Advantage Portfolio and Emerging Markets

-0.64

Correlation Coefficient

Advantage Portfolio  Emerging Markets

Excellent diversification

The 3 months correlation between Advantage and Emerging is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Advantage Portfolio Class and Emerging Markets Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets Por and Advantage Portfolio 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 Advantage Portfolio Class are associated (or correlated) with Emerging Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets Por has no effect on the direction of Advantage Portfolio i.e., Advantage Portfolio and Emerging Markets go up and down completely randomly.

Pair Corralation between Advantage Portfolio and Emerging Markets

Assuming the 90 days horizon Advantage Portfolio Class is expected to generate 1.45 times more return on investment than Emerging Markets. However, Advantage Portfolio is 1.45 times more volatile than Emerging Markets Portfolio. It trades about 0.35 of its potential returns per unit of risk. Emerging Markets Portfolio is currently generating about -0.04 per unit of risk. If you would invest  1,963  in Advantage Portfolio Class on September 19, 2024 and sell it today you would earn a total of  624.00  from holding Advantage Portfolio Class or generate 31.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Advantage Portfolio Class  vs.  Emerging Markets Portfolio

Advantage Portfolio Class

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Advantage Portfolio Class are ranked lower than 27 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Advantage Portfolio showed solid returns over the last few months and may actually be approaching a breakup point.

Emerging Markets Por

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Advantage Portfolio and Emerging Markets

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

The idea behind Advantage Portfolio Class and Emerging Markets Portfolio 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.