Correlation Between Emerging Markets and Great West

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

By analyzing existing cross correlation between Emerging Markets Fund and Great West Goldman Sachs, you can compare the effects of market volatilities on Emerging Markets and Great West 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 Great West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and Great West.

Diversification Opportunities for Emerging Markets and Great West

-0.35

Correlation Coefficient

Emerging Markets  Great West

Very good diversification

The 3 months correlation between Emerging and Great is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Fund and Great West Goldman Sachs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Goldman 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 Fund are associated (or correlated) with Great West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great West Goldman has no effect on the direction of Emerging Markets i.e., Emerging Markets and Great West go up and down completely randomly.

Pair Corralation between Emerging Markets and Great West

Assuming the 90 days horizon Emerging Markets Fund is expected to generate 0.52 times more return on investment than Great West. However, Emerging Markets Fund is 1.92 times less risky than Great West. It trades about 0.07 of its potential returns per unit of risk. Great West Goldman Sachs is currently generating about -0.15 per unit of risk. If you would invest  2,005  in Emerging Markets Fund on December 29, 2024 and sell it today you would earn a total of  83.00  from holding Emerging Markets Fund or generate 4.14% return on investment over 90 days.

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

Emerging Markets Fund  vs.  Great West Goldman Sachs

Emerging Markets

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emerging Markets Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Emerging Markets is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Great West Goldman

Risk-Adjusted Performance

Very Weak

Over the last 90 days Great West Goldman Sachs has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward-looking indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Emerging Markets and Great West

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

The idea behind Emerging Markets Fund and Great West Goldman Sachs 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.