Correlation Between Advantage Portfolio and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Advantage Portfolio 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 Advantage Portfolio and Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advantage Portfolio Class and Emerging Markets Portfolio, you can compare the effects of market volatilities on Advantage Portfolio 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 Advantage Portfolio with a short position of Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advantage Portfolio and Emerging Markets.
Diversification Opportunities for Advantage Portfolio and Emerging Markets
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Advantage and Emerging is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Advantage Portfolio Class and Emerging Markets Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets Por and Advantage Portfolio 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 Advantage Portfolio Class 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 Por has no effect on the direction of Advantage Portfolio i.e., Advantage Portfolio and Emerging Markets go up and down completely randomly.
Pair Corralation between Advantage Portfolio and Emerging Markets
Assuming the 90 days horizon Advantage Portfolio Class is expected to generate 1.81 times more return on investment than Emerging Markets. However, Advantage Portfolio is 1.81 times more volatile than Emerging Markets Portfolio. It trades about 0.07 of its potential returns per unit of risk. Emerging Markets Portfolio is currently generating about 0.05 per unit of risk. If you would invest 1,717 in Advantage Portfolio Class on April 20, 2025 and sell it today you would earn a total of 1,210 from holding Advantage Portfolio Class or generate 70.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Advantage Portfolio Class vs. Emerging Markets Portfolio
Performance |
| Timeline |
| Advantage Portfolio Class |
| Emerging Markets Por |
Advantage Portfolio and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advantage Portfolio and Emerging Markets
The main advantage of trading using opposite Advantage Portfolio and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advantage Portfolio 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.| Advantage Portfolio vs. Growth Portfolio Class | Advantage Portfolio vs. Global Opportunity Portfolio | Advantage Portfolio vs. International Advantage Portfolio | Advantage Portfolio vs. Morgan Stanley Multi |
| Emerging Markets vs. Delaware Healthcare Fund | Emerging Markets vs. The Hartford Healthcare | Emerging Markets vs. Tekla Healthcare Investors | Emerging Markets vs. Alger Health Sciences |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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