Correlation Between Sa International and Sa Emerging

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

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

Diversification Opportunities for Sa International and Sa Emerging

0.71

Correlation Coefficient

Sa International  Sa Emerging

Poor diversification

The 3 months correlation between SAISX and SAEMX is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Sa International Small and Sa Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sa Emerging Markets and Sa International 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 Sa International Small are associated (or correlated) with Sa Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sa Emerging Markets has no effect on the direction of Sa International i.e., Sa International and Sa Emerging go up and down completely randomly.

Pair Corralation between Sa International and Sa Emerging

Assuming the 90 days horizon Sa International is expected to generate 4.1 times less return on investment than Sa Emerging. But when comparing it to its historical volatility, Sa International Small is 1.09 times less risky than Sa Emerging. It trades about 0.02 of its potential returns per unit of risk. Sa Emerging Markets is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,041  in Sa Emerging Markets on September 8, 2024 and sell it today you would earn a total of  32.00  from holding Sa Emerging Markets or generate 3.07% return on investment over 90 days.

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

Sa International Small  vs.  Sa Emerging Markets

Sa International Small

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sa International Small are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Sa International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sa Emerging Markets

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sa Emerging Markets are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Sa 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 Sa International and Sa Emerging

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

The idea behind Sa International Small and Sa 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..