Correlation Between Emerging Markets and Vanguard Emerging
Can any of the company-specific risk be diversified away by investing in both Emerging Markets and Vanguard 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 Emerging Markets and Vanguard Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerging Markets Value and Vanguard Emerging Markets, you can compare the effects of market volatilities on Emerging Markets and Vanguard 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 Emerging Markets with a short position of Vanguard Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and Vanguard Emerging.
Diversification Opportunities for Emerging Markets and Vanguard Emerging
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Emerging and Vanguard is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Value and Vanguard Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Emerging Markets 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 Value are associated (or correlated) with Vanguard Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Emerging Markets has no effect on the direction of Emerging Markets i.e., Emerging Markets and Vanguard Emerging go up and down completely randomly.
Pair Corralation between Emerging Markets and Vanguard Emerging
Assuming the 90 days horizon Emerging Markets Value is expected to generate 0.95 times more return on investment than Vanguard Emerging. However, Emerging Markets Value is 1.05 times less risky than Vanguard Emerging. It trades about 0.14 of its potential returns per unit of risk. Vanguard Emerging Markets is currently generating about 0.09 per unit of risk. If you would invest 2,861 in Emerging Markets Value on January 26, 2024 and sell it today you would earn a total of 152.00 from holding Emerging Markets Value or generate 5.31% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 98.41% |
Values | Daily Returns |
Emerging Markets Value vs. Vanguard Emerging Markets
Performance |
Timeline |
Emerging Markets Value |
Vanguard Emerging Markets |
Emerging Markets and Vanguard Emerging Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Emerging Markets and Vanguard Emerging
The main advantage of trading using opposite Emerging Markets and Vanguard Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Markets position performs unexpectedly, Vanguard 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 Vanguard Emerging will offset losses from the drop in Vanguard Emerging's long position.Emerging Markets vs. Dfa International Small | Emerging Markets vs. International Small Pany | Emerging Markets vs. Emerging Markets Small | Emerging Markets vs. Dfa International Value |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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