Correlation Between Real Return and Lazard Emerging

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

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

Diversification Opportunities for Real Return and Lazard Emerging

0.8

Correlation Coefficient

Real Return  Lazard Emerging

Very poor diversification

The 3 months correlation between REAL and Lazard is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Real Return Fund and Lazard Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lazard Emerging Markets and Real Return 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 Real Return Fund are associated (or correlated) with Lazard Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lazard Emerging Markets has no effect on the direction of Real Return i.e., Real Return and Lazard Emerging go up and down completely randomly.

Pair Corralation between Real Return and Lazard Emerging

Assuming the 90 days horizon Real Return is expected to generate 2.32 times less return on investment than Lazard Emerging. But when comparing it to its historical volatility, Real Return Fund is 2.72 times less risky than Lazard Emerging. It trades about 0.17 of its potential returns per unit of risk. Lazard Emerging Markets is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,812  in Lazard Emerging Markets on December 25, 2024 and sell it today you would earn a total of  127.00  from holding Lazard Emerging Markets or generate 7.01% return on investment over 90 days.

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

Real Return Fund  vs.  Lazard Emerging Markets

Real Return Fund

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Real Return Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Real Return is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lazard Emerging Markets

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lazard Emerging Markets are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Lazard Emerging may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Real Return and Lazard Emerging

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

The idea behind Real Return Fund and Lazard Emerging Markets 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.