Correlation Between Strategic Allocation: and Emerging Markets

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

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

Diversification Opportunities for Strategic Allocation: and Emerging Markets

0.15

Correlation Coefficient

Strategic Allocation:  Emerging Markets

Average diversification

The 3 months correlation between Strategic and Emerging is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Allocation Moderate and Emerging Markets Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets Growth and Strategic Allocation: 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 Strategic Allocation Moderate 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 Growth has no effect on the direction of Strategic Allocation: i.e., Strategic Allocation: and Emerging Markets go up and down completely randomly.

Pair Corralation between Strategic Allocation: and Emerging Markets

Assuming the 90 days horizon Strategic Allocation Moderate is expected to under-perform the Emerging Markets. In addition to that, Strategic Allocation: is 1.34 times more volatile than Emerging Markets Growth. It trades about -0.38 of its total potential returns per unit of risk. Emerging Markets Growth is currently generating about -0.21 per unit of volatility. If you would invest  693.00  in Emerging Markets Growth on October 3, 2024 and sell it today you would lose (21.00) from holding Emerging Markets Growth or give up 3.03% of portfolio value over 90 days.

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

Strategic Allocation Moderate  vs.  Emerging Markets Growth

Strategic Allocation:

Risk-Adjusted Performance

0 of 100

Very Weak

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

Emerging Markets Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Emerging Markets Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental 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 Strategic Allocation: and Emerging Markets

The main advantage of trading using opposite Strategic Allocation: and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Allocation: 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 Strategic Allocation Moderate and Emerging Markets Growth 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.