Correlation Between Moderately Aggressive and Ashmore Emerging

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

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

Diversification Opportunities for Moderately Aggressive and Ashmore Emerging

-0.43

Correlation Coefficient

Moderately Aggressive  Ashmore Emerging

Very good diversification

The 3 months correlation between Moderately and Ashmore is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Moderately Aggressive Balanced and Ashmore Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashmore Emerging Markets and Moderately Aggressive 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 Moderately Aggressive Balanced are associated (or correlated) with Ashmore Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashmore Emerging Markets has no effect on the direction of Moderately Aggressive i.e., Moderately Aggressive and Ashmore Emerging go up and down completely randomly.

Pair Corralation between Moderately Aggressive and Ashmore Emerging

Assuming the 90 days horizon Moderately Aggressive Balanced is expected to under-perform the Ashmore Emerging. In addition to that, Moderately Aggressive is 1.02 times more volatile than Ashmore Emerging Markets. It trades about -0.17 of its total potential returns per unit of risk. Ashmore Emerging Markets is currently generating about -0.11 per unit of volatility. If you would invest  1,801  in Ashmore Emerging Markets on October 9, 2024 and sell it today you would lose (26.00) from holding Ashmore Emerging Markets or give up 1.44% of portfolio value over 90 days.

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

Moderately Aggressive Balanced  vs.  Ashmore Emerging Markets

Moderately Aggressive

Risk-Adjusted Performance

3 of 100

Very Weak

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

Ashmore Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ashmore Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Moderately Aggressive and Ashmore Emerging

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

The idea behind Moderately Aggressive Balanced and Ashmore 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.