Correlation Between Pzena International and Pzena Emerging

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

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

Diversification Opportunities for Pzena International and Pzena Emerging

0.65

Correlation Coefficient

Pzena International  Pzena Emerging

Poor diversification

The 3 months correlation between Pzena and Pzena is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Pzena International Value and Pzena Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pzena Emerging Markets and Pzena International 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 Pzena International Value are associated (or correlated) with Pzena Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pzena Emerging Markets has no effect on the direction of Pzena International i.e., Pzena International and Pzena Emerging go up and down completely randomly.

Pair Corralation between Pzena International and Pzena Emerging

Assuming the 90 days horizon Pzena International Value is expected to under-perform the Pzena Emerging. But the mutual fund apears to be less risky and, when comparing its historical volatility, Pzena International Value is 1.25 times less risky than Pzena Emerging. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Pzena Emerging Markets is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,296  in Pzena Emerging Markets on September 14, 2024 and sell it today you would earn a total of  31.00  from holding Pzena Emerging Markets or generate 2.39% return on investment over 90 days.

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

Pzena International Value  vs.  Pzena Emerging Markets

Pzena International Value

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pzena Emerging Markets

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pzena Emerging Markets are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Pzena Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pzena International and Pzena Emerging

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

The idea behind Pzena International Value and Pzena 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.