Correlation Between City National and Emerging Markets

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

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

Diversification Opportunities for City National and Emerging Markets

0.21

Correlation Coefficient

City National  Emerging Markets

Modest diversification

The 3 months correlation between City and Emerging is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding City National Rochdale and Emerging Markets Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets and City National 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 City National Rochdale 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 has no effect on the direction of City National i.e., City National and Emerging Markets go up and down completely randomly.

Pair Corralation between City National and Emerging Markets

Assuming the 90 days horizon City National is expected to generate 1.11 times less return on investment than Emerging Markets. But when comparing it to its historical volatility, City National Rochdale is 6.09 times less risky than Emerging Markets. It trades about 0.25 of its potential returns per unit of risk. Emerging Markets Fund is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,398  in Emerging Markets Fund on September 14, 2024 and sell it today you would earn a total of  274.00  from holding Emerging Markets Fund or generate 19.6% return on investment over 90 days.

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

City National Rochdale  vs.  Emerging Markets Fund

City National Rochdale

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in City National Rochdale are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, City National is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Emerging Markets

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with City National and Emerging Markets

The main advantage of trading using opposite City National and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if City National 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.

The idea behind City National Rochdale and Emerging Markets 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.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.