Correlation Between Emrg Mkts and FTSE EM

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Can any of the company-specific risk be diversified away by investing in both Emrg Mkts 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 Emrg Mkts and FTSE EM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emrg Mkts ESG and FTSE EM ETF, you can compare the effects of market volatilities on Emrg Mkts 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 Emrg Mkts with a short position of FTSE EM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emrg Mkts and FTSE EM.

Diversification Opportunities for Emrg Mkts and FTSE EM

0.99
  Correlation Coefficient

No risk reduction

The 3 months correlation between Emrg Mkts and FTSE EM is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Emrg Mkts ESG 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 Emrg Mkts 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 Emrg Mkts ESG 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 Emrg Mkts i.e., Emrg Mkts and FTSE EM go up and down completely randomly.

Pair Corralation between Emrg Mkts and FTSE EM

Given the investment horizon of 90 days Emrg Mkts ESG is expected to under-perform the FTSE EM. In addition to that, Emrg Mkts is 1.07 times more volatile than FTSE EM ETF. It trades about -0.06 of its total potential returns per unit of risk. FTSE EM ETF is currently generating about -0.04 per unit of volatility. If you would invest  4,303  in FTSE EM ETF on April 1, 2022 and sell it today you would lose (138.00)  from holding FTSE EM ETF or give up 3.21% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Emrg Mkts ESG  vs.  FTSE EM ETF

 Performance (%) 
      Timeline 
Emrg Mkts ESG 
Emrg Mkts Performance
0 of 100
Over the last 90 days Emrg Mkts ESG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Etf's technical and fundamental indicators remain rather sound which may send shares a bit higher in July 2022. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

Emrg Mkts 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 unsteady 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

Emrg Mkts and FTSE EM Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Emrg Mkts and FTSE EM

The main advantage of trading using opposite Emrg Mkts and FTSE EM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emrg Mkts 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.

Emrg Mkts ESG

Pair trading matchups for Emrg Mkts

The idea behind Emrg Mkts ESG 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 Transaction History module to view history of all your transactions and understand their impact on performance.

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