Correlation Between Overseas Portfolio and Henderson Emerging

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

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

Diversification Opportunities for Overseas Portfolio and Henderson Emerging

0.86

Correlation Coefficient

Overseas Portfolio  Henderson Emerging

Very poor diversification

The 3 months correlation between Overseas and Henderson is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Overseas Portfolio Institution and Henderson Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henderson Emerging and Overseas Portfolio 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 Overseas Portfolio Institutional are associated (or correlated) with Henderson Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henderson Emerging has no effect on the direction of Overseas Portfolio i.e., Overseas Portfolio and Henderson Emerging go up and down completely randomly.

Pair Corralation between Overseas Portfolio and Henderson Emerging

Assuming the 90 days horizon Overseas Portfolio Institutional is expected to under-perform the Henderson Emerging. But the mutual fund apears to be less risky and, when comparing its historical volatility, Overseas Portfolio Institutional is 1.02 times less risky than Henderson Emerging. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Henderson Emerging Markets is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  948.00  in Henderson Emerging Markets on September 21, 2024 and sell it today you would lose (17.00) from holding Henderson Emerging Markets or give up 1.79% of portfolio value over 90 days.

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

Overseas Portfolio Institution  vs.  Henderson Emerging Markets

Overseas Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

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

Henderson Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Henderson Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Henderson 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 Overseas Portfolio and Henderson Emerging

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

The idea behind Overseas Portfolio Institutional and Henderson 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.