Correlation Between Value Fund and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Value Fund and Emerging Markets 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 Value Fund and Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Value Fund I and Emerging Markets Fund, you can compare the effects of market volatilities on Value Fund and Emerging Markets 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 Value Fund with a short position of Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Value Fund and Emerging Markets.
Diversification Opportunities for Value Fund and Emerging Markets
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Value and Emerging is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Value Fund I and Emerging Markets Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets and Value Fund 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 Value Fund I are associated (or correlated) with Emerging Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets has no effect on the direction of Value Fund i.e., Value Fund and Emerging Markets go up and down completely randomly.
Pair Corralation between Value Fund and Emerging Markets
Assuming the 90 days horizon Value Fund is expected to generate 1.27 times less return on investment than Emerging Markets. But when comparing it to its historical volatility, Value Fund I is 1.15 times less risky than Emerging Markets. It trades about 0.06 of its potential returns per unit of risk. Emerging Markets Fund is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,106 in Emerging Markets Fund on June 5, 2025 and sell it today you would earn a total of 249.00 from holding Emerging Markets Fund or generate 22.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Value Fund I vs. Emerging Markets Fund
Performance |
| Timeline |
| Value Fund I |
| Emerging Markets |
Value Fund and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Value Fund and Emerging Markets
The main advantage of trading using opposite Value Fund and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value Fund position performs unexpectedly, Emerging Markets 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 Emerging Markets will offset losses from the drop in Emerging Markets' long position.| Value Fund vs. American Funds Retirement | Value Fund vs. Tiaa Cref Lifestyle Moderate | Value Fund vs. Cornerstone Moderately Aggressive | Value Fund vs. Lifestyle Ii Moderate |
| Emerging Markets vs. International Growth Fund | Emerging Markets vs. Value Fund I | Emerging Markets vs. Mfs International New | Emerging Markets vs. Heritage Fund I |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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