Correlation Between Weitz Balanced and The Emerging

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

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

Diversification Opportunities for Weitz Balanced and The Emerging

0.02

Correlation Coefficient

Weitz Balanced  The Emerging

Significant diversification

The 3 months correlation between Weitz and The is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Weitz Balanced and The Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets and Weitz Balanced 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 Weitz Balanced are associated (or correlated) with The Emerging. 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 has no effect on the direction of Weitz Balanced i.e., Weitz Balanced and The Emerging go up and down completely randomly.

Pair Corralation between Weitz Balanced and The Emerging

Assuming the 90 days horizon Weitz Balanced is expected to under-perform the The Emerging. But the mutual fund apears to be less risky and, when comparing its historical volatility, Weitz Balanced is 2.66 times less risky than The Emerging. The mutual fund trades about -0.01 of its potential returns per unit of risk. The The Emerging Markets is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,819  in The Emerging Markets on December 27, 2024 and sell it today you would earn a total of  72.00  from holding The Emerging Markets or generate 3.96% return on investment over 90 days.

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

Weitz Balanced  vs.  The Emerging Markets

Weitz Balanced

Risk-Adjusted Performance

Very Weak

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

Emerging Markets

Risk-Adjusted Performance

Modest

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

Pair Trading with Weitz Balanced and The Emerging

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

The idea behind Weitz Balanced and The 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.