Correlation Between DRW and Avantis Emerging

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

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

Diversification Opportunities for DRW and Avantis Emerging

-0.08

Correlation Coefficient

DRW  Avantis Emerging

Good diversification

The 3 months correlation between DRW and Avantis is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding DRW and Avantis Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis Emerging Markets and DRW 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 DRW are associated (or correlated) with Avantis Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis Emerging Markets has no effect on the direction of DRW i.e., DRW and Avantis Emerging go up and down completely randomly.

Pair Corralation between DRW and Avantis Emerging

If you would invest  1,752  in DRW on October 1, 2024 and sell it today you would earn a total of  0.00  from holding DRW or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	2.44%
Values	Daily Returns

DRW  vs.  Avantis Emerging Markets

DRW

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DRW has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, DRW is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Avantis Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avantis Emerging Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with DRW and Avantis Emerging

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

The idea behind DRW and Avantis 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.