Correlation Between Global Managed and Inverse Emerging

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

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

Diversification Opportunities for Global Managed and Inverse Emerging

-0.59

Correlation Coefficient

Global Managed  Inverse Emerging

Excellent diversification

The 3 months correlation between Global and Inverse is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Global Managed Volatility and Inverse Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Emerging Markets and Global Managed 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 Global Managed Volatility are associated (or correlated) with Inverse Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Emerging Markets has no effect on the direction of Global Managed i.e., Global Managed and Inverse Emerging go up and down completely randomly.

Pair Corralation between Global Managed and Inverse Emerging

Assuming the 90 days horizon Global Managed Volatility is expected to generate 0.28 times more return on investment than Inverse Emerging. However, Global Managed Volatility is 3.56 times less risky than Inverse Emerging. It trades about 0.08 of its potential returns per unit of risk. Inverse Emerging Markets is currently generating about -0.02 per unit of risk. If you would invest  858.00  in Global Managed Volatility on October 26, 2024 and sell it today you would earn a total of  257.00  from holding Global Managed Volatility or generate 29.95% return on investment over 90 days.

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

Global Managed Volatility  vs.  Inverse Emerging Markets

Global Managed Volatility

Risk-Adjusted Performance

0 of 100

Very Weak

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

Inverse Emerging Markets

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Inverse Emerging Markets are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Inverse Emerging may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Global Managed and Inverse Emerging

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

The idea behind Global Managed Volatility and Inverse 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 Stocks Directory module to find actively traded stocks across global markets.