Correlation Between Dfa Ltip and Emerging Markets

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

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

Diversification Opportunities for Dfa Ltip and Emerging Markets

0.81

Correlation Coefficient

Dfa Ltip  Emerging Markets

Very poor diversification

The 3 months correlation between Dfa and Emerging is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Ltip Portfolio and Emerging Markets Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets Por and Dfa Ltip 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 Ltip Portfolio are associated (or correlated) with Emerging Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets Por has no effect on the direction of Dfa Ltip i.e., Dfa Ltip and Emerging Markets go up and down completely randomly.

Pair Corralation between Dfa Ltip and Emerging Markets

Assuming the 90 days horizon Dfa Ltip Portfolio is expected to under-perform the Emerging Markets. In addition to that, Dfa Ltip is 1.58 times more volatile than Emerging Markets Portfolio. It trades about -0.02 of its total potential returns per unit of risk. Emerging Markets Portfolio is currently generating about 0.04 per unit of volatility. If you would invest  2,528  in Emerging Markets Portfolio on October 9, 2024 and sell it today you would earn a total of  350.00  from holding Emerging Markets Portfolio or generate 13.84% return on investment over 90 days.

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

Dfa Ltip Portfolio  vs.  Emerging Markets Portfolio

Dfa Ltip Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dfa Ltip Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Emerging Markets Por

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Dfa Ltip Portfolio and Emerging Markets Portfolio 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.