Correlation Between Barings Emerging and Madison Moderate

Can any of the company-specific risk be diversified away by investing in both Barings Emerging and Madison Moderate 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 Madison Moderate 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 Madison Moderate Allocation, you can compare the effects of market volatilities on Barings Emerging and Madison Moderate 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 Madison Moderate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barings Emerging and Madison Moderate.

Diversification Opportunities for Barings Emerging and Madison Moderate

0.36

Correlation Coefficient

Barings Emerging  Madison Moderate

Weak diversification

The 3 months correlation between Barings and Madison is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Barings Emerging Markets and Madison Moderate Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Moderate All 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 Madison Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Moderate All has no effect on the direction of Barings Emerging i.e., Barings Emerging and Madison Moderate go up and down completely randomly.

Pair Corralation between Barings Emerging and Madison Moderate

Assuming the 90 days horizon Barings Emerging Markets is expected to under-perform the Madison Moderate. But the mutual fund apears to be less risky and, when comparing its historical volatility, Barings Emerging Markets is 1.24 times less risky than Madison Moderate. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Madison Moderate Allocation is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,130  in Madison Moderate Allocation on September 14, 2024 and sell it today you would earn a total of  8.00  from holding Madison Moderate Allocation or generate 0.71% return on investment over 90 days.

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

Barings Emerging Markets  vs.  Madison Moderate Allocation

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.

Madison Moderate All

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Madison Moderate Allocation are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Madison Moderate 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 Madison Moderate

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

The idea behind Barings Emerging Markets and Madison Moderate Allocation 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.