Correlation Between Dfa Emerging and Us Core

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

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

Diversification Opportunities for Dfa Emerging and Us Core

0.58

Correlation Coefficient

Dfa Emerging  Us Core

Very weak diversification

The 3 months correlation between Dfa and DFQTX is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Emerging Markets and Us E Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us E Equity and Dfa 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 Dfa Emerging Markets are associated (or correlated) with Us Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us E Equity has no effect on the direction of Dfa Emerging i.e., Dfa Emerging and Us Core go up and down completely randomly.

Pair Corralation between Dfa Emerging and Us Core

Assuming the 90 days horizon Dfa Emerging Markets is expected to generate 0.86 times more return on investment than Us Core. However, Dfa Emerging Markets is 1.16 times less risky than Us Core. It trades about 0.0 of its potential returns per unit of risk. Us E Equity is currently generating about -0.05 per unit of risk. If you would invest  995.00  in Dfa Emerging Markets on December 28, 2024 and sell it today you would earn a total of  0.00  from holding Dfa Emerging Markets or generate 0.0% return on investment over 90 days.

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

Dfa Emerging Markets  vs.  Us E Equity

Dfa Emerging Markets

Risk-Adjusted Performance

Very Weak

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

Us E Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Us E Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Us Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dfa Emerging and Us Core

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

The idea behind Dfa Emerging Markets and Us E Equity 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 Valuation module to check real value of public entities based on technical and fundamental data.