Correlation Between Growth Portfolio and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Growth 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 Growth 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 Growth Portfolio Class and Emerging Markets Equity, you can compare the effects of market volatilities on Growth 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 Growth Portfolio with a short position of Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Portfolio and Emerging Markets.
Diversification Opportunities for Growth Portfolio and Emerging Markets
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Growth and Emerging is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Growth Portfolio Class and Emerging Markets Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets Equity and Growth 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 Growth 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 Equity has no effect on the direction of Growth Portfolio i.e., Growth Portfolio and Emerging Markets go up and down completely randomly.
Pair Corralation between Growth Portfolio and Emerging Markets
Assuming the 90 days horizon Growth Portfolio Class is expected to generate 2.45 times more return on investment than Emerging Markets. However, Growth Portfolio is 2.45 times more volatile than Emerging Markets Equity. It trades about 0.24 of its potential returns per unit of risk. Emerging Markets Equity is currently generating about -0.04 per unit of risk. If you would invest 4,705 in Growth Portfolio Class on October 31, 2024 and sell it today you would earn a total of 1,437 from holding Growth Portfolio Class or generate 30.54% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Growth Portfolio Class vs. Emerging Markets Equity
Performance |
Timeline |
Growth Portfolio Class |
Emerging Markets Equity |
Growth Portfolio and Emerging Markets Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Growth Portfolio and Emerging Markets
The main advantage of trading using opposite Growth Portfolio and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth 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.Growth Portfolio vs. Mid Cap Growth | ||
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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