Correlation Between Emerging Markets and Dfa Real
Can any of the company-specific risk be diversified away by investing in both Emerging Markets and Dfa Real 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 Real 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 Real Estate, you can compare the effects of market volatilities on Emerging Markets and Dfa Real 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 Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and Dfa Real.
Diversification Opportunities for Emerging Markets and Dfa Real
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 Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Real Estate 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 Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Real Estate has no effect on the direction of Emerging Markets i.e., Emerging Markets and Dfa Real go up and down completely randomly.
Pair Corralation between Emerging Markets and Dfa Real
Assuming the 90 days horizon Emerging Markets is expected to generate 1.17 times less return on investment than Dfa Real. But when comparing it to its historical volatility, Emerging Markets E is 1.59 times less risky than Dfa Real. It trades about 0.06 of its potential returns per unit of risk. Dfa Real Estate is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 4,022 in Dfa Real Estate on November 1, 2024 and sell it today you would earn a total of 39.00 from holding Dfa Real Estate or generate 0.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerging Markets E vs. Dfa Real Estate
Performance |
| Timeline |
| Emerging Markets E |
| Dfa Real Estate |
Emerging Markets and Dfa Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerging Markets and Dfa Real
The main advantage of trading using opposite Emerging Markets and Dfa Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Markets position performs unexpectedly, Dfa Real 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 Real will offset losses from the drop in Dfa Real'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 Real vs. Dfa International Small | Dfa Real vs. Us Large Cap | Dfa Real vs. International Small Pany | Dfa Real vs. Dfa International Value |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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