Correlation Between Emerging Markets and Select Fund
Can any of the company-specific risk be diversified away by investing in both Emerging Markets and Select Fund 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 Select Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerging Markets Fund and Select Fund A, you can compare the effects of market volatilities on Emerging Markets and Select Fund 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 Select Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and Select Fund.
Diversification Opportunities for Emerging Markets and Select Fund
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Emerging and Select is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Fund and Select Fund A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Fund A 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 Fund are associated (or correlated) with Select Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Fund A has no effect on the direction of Emerging Markets i.e., Emerging Markets and Select Fund go up and down completely randomly.
Pair Corralation between Emerging Markets and Select Fund
Assuming the 90 days horizon Emerging Markets is expected to generate 1.07 times less return on investment than Select Fund. But when comparing it to its historical volatility, Emerging Markets Fund is 1.37 times less risky than Select Fund. It trades about 0.05 of its potential returns per unit of risk. Select Fund A is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 9,574 in Select Fund A on April 22, 2025 and sell it today you would earn a total of 2,537 from holding Select Fund A or generate 26.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerging Markets Fund vs. Select Fund A
Performance |
| Timeline |
| Emerging Markets |
| Select Fund A |
Emerging Markets and Select Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerging Markets and Select Fund
The main advantage of trading using opposite Emerging Markets and Select Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Markets position performs unexpectedly, Select Fund 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 Select Fund will offset losses from the drop in Select Fund's long position.| Emerging Markets vs. International Growth Fund | Emerging Markets vs. Value Fund I | Emerging Markets vs. Mfs International New | Emerging Markets vs. Heritage Fund I |
| Select Fund vs. Ultra Fund A | Select Fund vs. International Growth Fund | Select Fund vs. Select Fund I | Select Fund vs. Growth Fund A |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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