diversifiable risk of combining Mfs Emerging and Ashmore Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mfs Emerging Markets and Ashmore Emerging Markets, you can compare the effects of market volatilities on Mfs Emerging and Ashmore 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 Mfs Emerging with a short position of Ashmore Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mfs Emerging and Ashmore Emerging.
Diversification Opportunities for Mfs Emerging and Ashmore Emerging
Pair Corralation between Mfs Emerging and Ashmore Emerging
Assuming the 90 days horizon Mfs Emerging Markets is expected to generate 1.24 times more return on investment than Ashmore Emerging. However, Mfs Emerging is 1.24 times more volatile than Ashmore Emerging Markets. It trades about -0.04 of its potential returns per unit of risk. Ashmore Emerging Markets is currently generating about -0.05 per unit of risk. If you would invest 1,288 in Mfs Emerging Markets on November 24, 2023 and sell it today you would lose (110.00) from holding Mfs Emerging Markets or give up 8.54% of portfolio value over 90 days.
MFS EMERGING MARKETS vs. Ashmore Emerging Markets
Mfs Emerging and Ashmore Emerging Volatility Contrast
Pair Trading with Mfs Emerging and Ashmore EmergingThe main advantage of trading using opposite Mfs Emerging and Ashmore Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mfs Emerging position performs unexpectedly, Ashmore 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 Ashmore Emerging will offset losses from the drop in Ashmore Emerging's long position. The idea behind Mfs Emerging Markets and Ashmore 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.
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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