Correlation Between Energy Basic and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Energy Basic 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 Energy Basic and Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Basic Materials and Emerging Markets Equity, you can compare the effects of market volatilities on Energy Basic 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 Energy Basic with a short position of Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Basic and Emerging Markets.
Diversification Opportunities for Energy Basic and Emerging Markets
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Energy and Emerging is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Energy Basic Materials and Emerging Markets Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets Equity and Energy Basic 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 Energy Basic Materials 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 Equity has no effect on the direction of Energy Basic i.e., Energy Basic and Emerging Markets go up and down completely randomly.
Pair Corralation between Energy Basic and Emerging Markets
Assuming the 90 days horizon Energy Basic is expected to generate 1.29 times less return on investment than Emerging Markets. In addition to that, Energy Basic is 1.25 times more volatile than Emerging Markets Equity. It trades about 0.09 of its total potential returns per unit of risk. Emerging Markets Equity is currently generating about 0.15 per unit of volatility. If you would invest 1,503 in Emerging Markets Equity on June 7, 2025 and sell it today you would earn a total of 102.00 from holding Emerging Markets Equity or generate 6.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy Basic Materials vs. Emerging Markets Equity
Performance |
| Timeline |
| Energy Basic Materials |
| Emerging Markets Equity |
Energy Basic and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Basic and Emerging Markets
The main advantage of trading using opposite Energy Basic and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Basic 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.| Energy Basic vs. Jennison Natural Resources | Energy Basic vs. Gmo Resources | Energy Basic vs. Pimco Energy Tactical | Energy Basic vs. Calvert Global Energy |
| Emerging Markets vs. Harris Associates Investment | Emerging Markets vs. Baird Quality Intermediate | Emerging Markets vs. Dodge Global Bond | Emerging Markets vs. Ultra Short Fixed Income |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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