Correlation Between Emerging Markets and Dfa Global
Can any of the company-specific risk be diversified away by investing in both Emerging Markets and Dfa Global 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 Emerging Markets and Dfa Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerging Markets E and Dfa Global Real, you can compare the effects of market volatilities on Emerging Markets and Dfa Global 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 Emerging Markets with a short position of Dfa Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and Dfa Global.
Diversification Opportunities for Emerging Markets and Dfa Global
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Emerging and Dfa is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets E and Dfa Global Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Global Real and Emerging Markets 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 Emerging Markets E are associated (or correlated) with Dfa Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Global Real has no effect on the direction of Emerging Markets i.e., Emerging Markets and Dfa Global go up and down completely randomly.
Pair Corralation between Emerging Markets and Dfa Global
Assuming the 90 days horizon Emerging Markets is expected to generate 1.11 times less return on investment than Dfa Global. But when comparing it to its historical volatility, Emerging Markets E is 1.16 times less risky than Dfa Global. It trades about 0.05 of its potential returns per unit of risk. Dfa Global Real is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 941.00 in Dfa Global Real on November 3, 2024 and sell it today you would earn a total of 87.00 from holding Dfa Global Real or generate 9.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Emerging Markets E vs. Dfa Global Real
Performance |
| Timeline |
| Emerging Markets E |
| Dfa Global Real |
Emerging Markets and Dfa Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerging Markets and Dfa Global
The main advantage of trading using opposite Emerging Markets and Dfa Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Markets position performs unexpectedly, Dfa Global 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 Global will offset losses from the drop in Dfa Global's long position.| Emerging Markets vs. International E Equity | Emerging Markets vs. Dfa International Small | Emerging Markets vs. Us E Equity | Emerging Markets vs. Us Large Cap |
| Dfa Global vs. International E Equity | Dfa Global vs. Emerging Markets E | Dfa Global vs. Us E Equity | Dfa Global vs. Dfa International Small |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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