Correlation Between Dimensional Emerging and Day HaganNed
Can any of the company-specific risk be diversified away by investing in both Dimensional Emerging and Day HaganNed 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 Day HaganNed 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 Day HaganNed Davis, you can compare the effects of market volatilities on Dimensional Emerging and Day HaganNed 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 Day HaganNed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Emerging and Day HaganNed.
Diversification Opportunities for Dimensional Emerging and Day HaganNed
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dimensional and Day is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Emerging Core and Day HaganNed Davis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Day HaganNed Davis 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 Day HaganNed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Day HaganNed Davis has no effect on the direction of Dimensional Emerging i.e., Dimensional Emerging and Day HaganNed go up and down completely randomly.
Pair Corralation between Dimensional Emerging and Day HaganNed
Given the investment horizon of 90 days Dimensional Emerging Core is expected to under-perform the Day HaganNed. In addition to that, Dimensional Emerging is 1.19 times more volatile than Day HaganNed Davis. It trades about -0.16 of its total potential returns per unit of risk. Day HaganNed Davis is currently generating about -0.12 per unit of volatility. If you would invest 2,978 in Day HaganNed Davis on August 30, 2024 and sell it today you would lose (70.00) from holding Day HaganNed Davis or give up 2.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Emerging Core vs. Day HaganNed Davis
Performance |
| Timeline |
| Dimensional Emerging Core |
| Day HaganNed Davis |
Dimensional Emerging and Day HaganNed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Emerging and Day HaganNed
The main advantage of trading using opposite Dimensional Emerging and Day HaganNed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Emerging position performs unexpectedly, Day HaganNed 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 Day HaganNed will offset losses from the drop in Day HaganNed's long position.The idea behind Dimensional Emerging Core and Day HaganNed Davis 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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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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