Correlation Between Short Duration and Ashmore Emerging

Can any of the company-specific risk be diversified away by investing in both Short Duration and Ashmore Emerging 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 Short Duration and Ashmore Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Short Duration Inflation and Ashmore Emerging Markets, you can compare the effects of market volatilities on Short Duration and Ashmore Emerging 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 Short Duration with a short position of Ashmore Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Duration and Ashmore Emerging.

Diversification Opportunities for Short Duration and Ashmore Emerging

-0.44

Correlation Coefficient

Short Duration  Ashmore Emerging

Very good diversification

The 3 months correlation between Short and Ashmore is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Short Duration Inflation and Ashmore Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashmore Emerging Markets and Short Duration 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 Short Duration Inflation are associated (or correlated) with Ashmore Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashmore Emerging Markets has no effect on the direction of Short Duration i.e., Short Duration and Ashmore Emerging go up and down completely randomly.

Pair Corralation between Short Duration and Ashmore Emerging

Assuming the 90 days horizon Short Duration Inflation is expected to under-perform the Ashmore Emerging. But the mutual fund apears to be less risky and, when comparing its historical volatility, Short Duration Inflation is 2.59 times less risky than Ashmore Emerging. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Ashmore Emerging Markets is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  479.00  in Ashmore Emerging Markets on September 17, 2024 and sell it today you would earn a total of  7.00  from holding Ashmore Emerging Markets or generate 1.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Short Duration Inflation  vs.  Ashmore Emerging Markets

Short Duration Inflation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Short Duration Inflation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Short Duration is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ashmore Emerging Markets

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ashmore Emerging Markets are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ashmore Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Short Duration and Ashmore Emerging

The main advantage of trading using opposite Short Duration and Ashmore Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short Duration position performs unexpectedly, Ashmore Emerging 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 Ashmore Emerging will offset losses from the drop in Ashmore Emerging's long position.

The idea behind Short Duration Inflation and Ashmore Emerging Markets pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.