Correlation Between WCM Focused and Vanguard Emerging

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

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

Diversification Opportunities for WCM Focused and Vanguard Emerging

0.83
  Correlation Coefficient
WCM Focused Emerging
Vanguard Emerging Mkts

Very poor diversification

The 3 months correlation between WFEMX and Vanguard is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding WCM Focused Emerging and Vanguard Emerging Mkts in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Emerging Mkts and WCM Focused 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 WCM Focused Emerging 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 Mkts has no effect on the direction of WCM Focused i.e., WCM Focused and Vanguard Emerging go up and down completely randomly.

Pair Corralation between WCM Focused and Vanguard Emerging

Assuming the 90 days horizon WCM Focused Emerging is expected to generate 1.08 times more return on investment than Vanguard Emerging. However, WCM Focused is 1.08 times more volatile than Vanguard Emerging Mkts. It trades about 0.04 of its potential returns per unit of risk. Vanguard Emerging Mkts is currently generating about 0.05 per unit of risk. If you would invest  1,715  in WCM Focused Emerging on August 30, 2021 and sell it today you would earn a total of  203.00  from holding WCM Focused Emerging or generate 11.84% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

WCM Focused Emerging  vs.  Vanguard Emerging Mkts

 Performance (%) 
      Timeline 
WCM Focused Emerging 
WFEMX Performance
0 of 100
Over the last 90 days WCM Focused Emerging has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.
Vanguard Emerging Mkts 
Vanguard Performance
0 of 100
Over the last 90 days Vanguard Emerging Mkts has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Vanguard Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

WCM Focused and Vanguard Emerging Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with WCM Focused and Vanguard Emerging

The main advantage of trading using opposite WCM Focused and Vanguard Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WCM Focused 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.
The idea behind WCM Focused Emerging and Vanguard Emerging Mkts 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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