Correlation Between Dimensional Emerging and PBDM
Can any of the company-specific risk be diversified away by investing in both Dimensional Emerging and PBDM 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 Dimensional Emerging and PBDM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dimensional Emerging Core and PBDM, you can compare the effects of market volatilities on Dimensional Emerging and PBDM 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 Dimensional Emerging with a short position of PBDM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Emerging and PBDM.
Diversification Opportunities for Dimensional Emerging and PBDM
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Dimensional and PBDM is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Emerging Core and PBDM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PBDM and Dimensional 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 Dimensional Emerging Core are associated (or correlated) with PBDM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PBDM has no effect on the direction of Dimensional Emerging i.e., Dimensional Emerging and PBDM go up and down completely randomly.
Pair Corralation between Dimensional Emerging and PBDM
If you would invest 2,617 in PBDM on August 29, 2024 and sell it today you would earn a total of 0.00 from holding PBDM or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 4.55% |
| Values | Daily Returns |
Dimensional Emerging Core vs. PBDM
Performance |
| Timeline |
| Dimensional Emerging Core |
| PBDM |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Dimensional Emerging and PBDM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Emerging and PBDM
The main advantage of trading using opposite Dimensional Emerging and PBDM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Emerging position performs unexpectedly, PBDM 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 PBDM will offset losses from the drop in PBDM's long position.The idea behind Dimensional Emerging Core and PBDM 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.
| PBDM vs. Dimensional Core Equity | PBDM vs. Dimensional Emerging Core | PBDM vs. Dimensional Targeted Value | PBDM vs. Dimensional Small Cap |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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