Correlation Between Investec Emerging and First Investors

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

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

Diversification Opportunities for Investec Emerging and First Investors

-0.3

Correlation Coefficient

Investec Emerging  First Investors

Very good diversification

The 3 months correlation between Investec and First is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Investec Emerging Markets and First Investors Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Investors Select and Investec Emerging 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 Investec Emerging Markets are associated (or correlated) with First Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Investors Select has no effect on the direction of Investec Emerging i.e., Investec Emerging and First Investors go up and down completely randomly.

Pair Corralation between Investec Emerging and First Investors

Assuming the 90 days horizon Investec Emerging Markets is expected to generate 0.41 times more return on investment than First Investors. However, Investec Emerging Markets is 2.44 times less risky than First Investors. It trades about -0.26 of its potential returns per unit of risk. First Investors Select is currently generating about -0.21 per unit of risk. If you would invest  1,109  in Investec Emerging Markets on October 9, 2024 and sell it today you would lose (35.00) from holding Investec Emerging Markets or give up 3.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Investec Emerging Markets  vs.  First Investors Select

Investec Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

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

First Investors Select

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Investors Select are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, First Investors is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Investec Emerging and First Investors

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

The idea behind Investec Emerging Markets and First Investors Select 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.