Correlation Between Ep Emerging and Dfa Commodity

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

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

Diversification Opportunities for Ep Emerging and Dfa Commodity

0.75

Correlation Coefficient

Ep Emerging  Dfa Commodity

Poor diversification

The 3 months correlation between EPASX and Dfa is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Ep Emerging Markets and Dfa Commodity Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Commodity Strategy and Ep 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 Ep Emerging Markets are associated (or correlated) with Dfa Commodity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Commodity Strategy has no effect on the direction of Ep Emerging i.e., Ep Emerging and Dfa Commodity go up and down completely randomly.

Pair Corralation between Ep Emerging and Dfa Commodity

Assuming the 90 days horizon Ep Emerging Markets is expected to generate 1.01 times more return on investment than Dfa Commodity. However, Ep Emerging is 1.01 times more volatile than Dfa Commodity Strategy. It trades about 0.01 of its potential returns per unit of risk. Dfa Commodity Strategy is currently generating about -0.01 per unit of risk. If you would invest  943.00  in Ep Emerging Markets on October 4, 2024 and sell it today you would earn a total of  10.00  from holding Ep Emerging Markets or generate 1.06% return on investment over 90 days.

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

Ep Emerging Markets  vs.  Dfa Commodity Strategy

Ep Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ep Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Dfa Commodity Strategy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ep Emerging and Dfa Commodity

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

The idea behind Ep Emerging Markets and Dfa Commodity Strategy 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .