Correlation Between Emerging Markets and FTSE EM

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Emerging Markets and FTSE EM 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 FTSE EM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerging Markets Ishares and FTSE EM ETF, you can compare the effects of market volatilities on Emerging Markets and FTSE EM 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 FTSE EM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and FTSE EM.

Diversification Opportunities for Emerging Markets and FTSE EM

1.0
  Correlation Coefficient

No risk reduction

The 3 months correlation between Emerging and FTSE EM is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Ishares and FTSE EM ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTSE EM ETF 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 Ishares are associated (or correlated) with FTSE EM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FTSE EM ETF has no effect on the direction of Emerging Markets i.e., Emerging Markets and FTSE EM go up and down completely randomly.

Pair Corralation between Emerging Markets and FTSE EM

Considering the 90-day investment horizon Emerging Markets Ishares is expected to under-perform the FTSE EM. In addition to that, Emerging Markets is 1.04 times more volatile than FTSE EM ETF. It trades about -0.05 of its total potential returns per unit of risk. FTSE EM ETF is currently generating about -0.03 per unit of volatility. If you would invest  5,003  in FTSE EM ETF on April 5, 2022 and sell it today you would lose (863.00)  from holding FTSE EM ETF or give up 17.25% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Emerging Markets Ishares  vs.  FTSE EM ETF

 Performance (%) 
      Timeline 
Emerging Markets Ishares 
Emerging Performance
0 of 100
Over the last 90 days Emerging Markets Ishares has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Etf's technical and fundamental indicators remain relatively steady which may send shares a bit higher in August 2022. The new chaos may also be a sign of medium-term up-swing for the ETF firm stakeholders.

Emerging Price Channel

FTSE EM ETF 
FTSE EM Performance
0 of 100
Over the last 90 days FTSE EM ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Etf's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the ETF venture institutional investors.

FTSE EM Price Channel

Emerging Markets and FTSE EM Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Emerging Markets and FTSE EM

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

Emerging Markets Ishares

Pair trading matchups for Emerging Markets

The idea behind Emerging Markets Ishares and FTSE EM ETF 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.

FTSE EM ETF

Pair trading matchups for FTSE EM

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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

Other Complementary Tools

Transaction History
View history of all your transactions and understand their impact on performance
Go
My Watchlist Analysis
Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like
Go
Idea Breakdown
Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes
Go
Global Correlations
Find global opportunities by holding instruments from different markets
Go
Instant Ratings
Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance
Go
Stock Screener
Find equities using custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook.
Go
Positions Ratings
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
Go
Bond Analysis
Evaluate and analyze corporate bonds as a potential investment for your portfolios.
Go
Fund Screener
Find actively-traded funds from around the world traded on over 30 global exchanges
Go
Pair Correlation
Compare performance and examine fundamental relationship between any two equity instruments
Go