Correlation Between Barings Emerging and Dana Small

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

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

Diversification Opportunities for Barings Emerging and Dana Small

-0.35

Correlation Coefficient

Barings Emerging  Dana Small

Very good diversification

The 3 months correlation between Barings and Dana is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Barings Emerging Markets and Dana Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dana Small Cap and Barings Emerging 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 Barings Emerging Markets are associated (or correlated) with Dana Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dana Small Cap has no effect on the direction of Barings Emerging i.e., Barings Emerging and Dana Small go up and down completely randomly.

Pair Corralation between Barings Emerging and Dana Small

Assuming the 90 days horizon Barings Emerging is expected to generate 2.23 times less return on investment than Dana Small. But when comparing it to its historical volatility, Barings Emerging Markets is 4.28 times less risky than Dana Small. It trades about 0.06 of its potential returns per unit of risk. Dana Small Cap is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,525  in Dana Small Cap on September 16, 2024 and sell it today you would earn a total of  8.00  from holding Dana Small Cap or generate 0.52% return on investment over 90 days.

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

Barings Emerging Markets  vs.  Dana Small Cap

Barings Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dana Small Cap

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dana Small Cap are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Dana Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Barings Emerging and Dana Small

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

The idea behind Barings Emerging Markets and Dana Small Cap 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.