Correlation Between Ep Emerging and Dfa Short-term

Can any of the company-specific risk be diversified away by investing in both Ep Emerging and Dfa Short-term 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 Short-term 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 Short Term Government, you can compare the effects of market volatilities on Ep Emerging and Dfa Short-term 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 Short-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ep Emerging and Dfa Short-term.

Diversification Opportunities for Ep Emerging and Dfa Short-term

0.08

Correlation Coefficient

Ep Emerging  Dfa Short-term

Significant diversification

The 3 months correlation between EPASX and Dfa is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ep Emerging Markets and Dfa Short Term Government in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Short Term 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 Short-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Short Term has no effect on the direction of Ep Emerging i.e., Ep Emerging and Dfa Short-term go up and down completely randomly.

Pair Corralation between Ep Emerging and Dfa Short-term

Assuming the 90 days horizon Ep Emerging is expected to generate 1.73 times less return on investment than Dfa Short-term. In addition to that, Ep Emerging is 18.95 times more volatile than Dfa Short Term Government. It trades about 0.01 of its total potential returns per unit of risk. Dfa Short Term Government is currently generating about 0.49 per unit of volatility. If you would invest  953.00  in Dfa Short Term Government on December 4, 2024 and sell it today you would earn a total of  47.00  from holding Dfa Short Term Government or generate 4.93% return on investment over 90 days.

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

Ep Emerging Markets  vs.  Dfa Short Term Government

Ep Emerging Markets

Risk-Adjusted Performance

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 fairly strong basic indicators, Ep Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dfa Short Term

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Short Term Government are ranked lower than 35 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Dfa Short-term 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 Short-term

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

The idea behind Ep Emerging Markets and Dfa Short Term Government 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.