Correlation Between Origin Emerging and The National

Can any of the company-specific risk be diversified away by investing in both Origin Emerging and The National 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 The National 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 The National Tax Free, you can compare the effects of market volatilities on Origin Emerging and The National 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 The National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Origin Emerging and The National.

Diversification Opportunities for Origin Emerging and The National

0.22

Correlation Coefficient

Origin Emerging  The National

Modest diversification

The 3 months correlation between Origin and The is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Origin Emerging Markets and The National Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Tax 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 The National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Tax has no effect on the direction of Origin Emerging i.e., Origin Emerging and The National go up and down completely randomly.

Pair Corralation between Origin Emerging and The National

Assuming the 90 days horizon Origin Emerging Markets is expected to generate 2.03 times more return on investment than The National. However, Origin Emerging is 2.03 times more volatile than The National Tax Free. It trades about -0.04 of its potential returns per unit of risk. The National Tax Free is currently generating about -0.34 per unit of risk. If you would invest  1,050  in Origin Emerging Markets on October 7, 2024 and sell it today you would lose (4.00) from holding Origin Emerging Markets or give up 0.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Origin Emerging Markets  vs.  The National Tax Free

Origin Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Origin Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. 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.

National Tax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The National Tax Free has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, The National 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 The National

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

The idea behind Origin Emerging Markets and The National Tax Free 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.