Correlation Between Emerging Markets and Msif International

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

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

Diversification Opportunities for Emerging Markets and Msif International

0.84

Correlation Coefficient

Emerging Markets  Msif International

Very poor diversification

The 3 months correlation between Emerging and Msif is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Equity and Msif International Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Msif International and Emerging Markets 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 Emerging Markets Equity are associated (or correlated) with Msif International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Msif International has no effect on the direction of Emerging Markets i.e., Emerging Markets and Msif International go up and down completely randomly.

Pair Corralation between Emerging Markets and Msif International

Assuming the 90 days horizon Emerging Markets Equity is expected to generate 0.8 times more return on investment than Msif International. However, Emerging Markets Equity is 1.25 times less risky than Msif International. It trades about 0.07 of its potential returns per unit of risk. Msif International Opportunity is currently generating about 0.04 per unit of risk. If you would invest  1,336  in Emerging Markets Equity on December 29, 2024 and sell it today you would earn a total of  54.00  from holding Emerging Markets Equity or generate 4.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Emerging Markets Equity  vs.  Msif International Opportunity

Emerging Markets Equity

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Emerging Markets Equity are ranked lower than 5 (%) 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.

Msif International

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Emerging Markets and Msif International

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

The idea behind Emerging Markets Equity and Msif International Opportunity 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.