Correlation Between Origin Emerging and Moderate Duration

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

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

Diversification Opportunities for Origin Emerging and Moderate Duration

0.6

Correlation Coefficient

Origin Emerging  Moderate Duration

Poor diversification

The 3 months correlation between Origin and Moderate is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Origin Emerging Markets and Moderate Duration Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderate Duration and Origin 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 Origin Emerging Markets are associated (or correlated) with Moderate Duration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderate Duration has no effect on the direction of Origin Emerging i.e., Origin Emerging and Moderate Duration go up and down completely randomly.

Pair Corralation between Origin Emerging and Moderate Duration

Assuming the 90 days horizon Origin Emerging Markets is expected to generate 4.36 times more return on investment than Moderate Duration. However, Origin Emerging is 4.36 times more volatile than Moderate Duration Fund. It trades about 0.07 of its potential returns per unit of risk. Moderate Duration Fund is currently generating about 0.1 per unit of risk. If you would invest  907.00  in Origin Emerging Markets on September 17, 2024 and sell it today you would earn a total of  148.00  from holding Origin Emerging Markets or generate 16.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	86.23%
Values	Daily Returns

Origin Emerging Markets  vs.  Moderate Duration Fund

Origin Emerging Markets

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Origin Emerging Markets are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Origin Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Moderate Duration

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Origin Emerging and Moderate Duration

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

The idea behind Origin Emerging Markets and Moderate Duration 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..