Correlation Between EM and Core

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

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

Diversification Opportunities for EM and Core

0.0

Correlation Coefficient

EM  Core

Pay attention - limited upside

The 3 months correlation between EM and Core is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding EM and Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core and EM 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 EM are associated (or correlated) with Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core has no effect on the direction of EM i.e., EM and Core go up and down completely randomly.

Pair Corralation between EM and Core

If you would invest  0.01  in EM on April 20, 2025 and sell it today you would earn a total of  0.00  from holding EM or generate 0.0% return on investment over 90 days.

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

EM  vs.  Core

EM

Risk-Adjusted Performance

Very Weak

Over the last 90 days EM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, EM is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Core

Risk-Adjusted Performance

Very Weak

Over the last 90 days Core has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for Core shareholders.

Pair Trading with EM and Core

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

The idea behind EM and Core 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.