Correlation Between Frontier Markets and Advantage Portfolio
Can any of the company-specific risk be diversified away by investing in both Frontier Markets and Advantage Portfolio 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 Frontier Markets and Advantage Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Frontier Markets Portfolio and Advantage Portfolio Class, you can compare the effects of market volatilities on Frontier Markets and Advantage Portfolio 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 Frontier Markets with a short position of Advantage Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frontier Markets and Advantage Portfolio.
Diversification Opportunities for Frontier Markets and Advantage Portfolio
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Frontier and Advantage is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Markets Portfolio and Advantage Portfolio Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantage Portfolio Class and Frontier 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 Frontier Markets Portfolio are associated (or correlated) with Advantage Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advantage Portfolio Class has no effect on the direction of Frontier Markets i.e., Frontier Markets and Advantage Portfolio go up and down completely randomly.
Pair Corralation between Frontier Markets and Advantage Portfolio
Assuming the 90 days horizon Frontier Markets is expected to generate 3.7 times less return on investment than Advantage Portfolio. But when comparing it to its historical volatility, Frontier Markets Portfolio is 2.61 times less risky than Advantage Portfolio. It trades about 0.06 of its potential returns per unit of risk. Advantage Portfolio Class is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,421 in Advantage Portfolio Class on March 25, 2025 and sell it today you would earn a total of 923.00 from holding Advantage Portfolio Class or generate 64.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Frontier Markets Portfolio vs. Advantage Portfolio Class
Performance |
| Timeline |
| Frontier Markets Por |
| Advantage Portfolio Class |
Frontier Markets and Advantage Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Frontier Markets and Advantage Portfolio
The main advantage of trading using opposite Frontier Markets and Advantage Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frontier Markets position performs unexpectedly, Advantage Portfolio 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 Advantage Portfolio will offset losses from the drop in Advantage Portfolio's long position.| Frontier Markets vs. Frontier Markets Portfolio | Frontier Markets vs. Hennessy Japan Fund | Frontier Markets vs. Hennessy Japan Fund | Frontier Markets vs. Hennessy Japan Small |
| Advantage Portfolio vs. Putnam Money Market | Advantage Portfolio vs. Vanguard Money Market | Advantage Portfolio vs. Schwab Government Money | Advantage Portfolio vs. Fidelity Money Market |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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