Correlation Between Emerging Markets and Dfa Inflation
Can any of the company-specific risk be diversified away by investing in both Emerging Markets and Dfa Inflation 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 Inflation 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 Inflation Protected, you can compare the effects of market volatilities on Emerging Markets and Dfa Inflation 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 Inflation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and Dfa Inflation.
Diversification Opportunities for Emerging Markets and Dfa Inflation
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Emerging and Dfa is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets E and Dfa Inflation Protected in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Inflation Protected 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 Inflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Inflation Protected has no effect on the direction of Emerging Markets i.e., Emerging Markets and Dfa Inflation go up and down completely randomly.
Pair Corralation between Emerging Markets and Dfa Inflation
Assuming the 90 days horizon Emerging Markets E is expected to generate 1.99 times more return on investment than Dfa Inflation. However, Emerging Markets is 1.99 times more volatile than Dfa Inflation Protected. It trades about 0.06 of its potential returns per unit of risk. Dfa Inflation Protected is currently generating about 0.03 per unit of risk. If you would invest 1,942 in Emerging Markets E on August 26, 2024 and sell it today you would earn a total of 443.00 from holding Emerging Markets E or generate 22.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerging Markets E vs. Dfa Inflation Protected
Performance |
| Timeline |
| Emerging Markets E |
| Dfa Inflation Protected |
Emerging Markets and Dfa Inflation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerging Markets and Dfa Inflation
The main advantage of trading using opposite Emerging Markets and Dfa Inflation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Markets position performs unexpectedly, Dfa Inflation 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 Inflation will offset losses from the drop in Dfa Inflation'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 Inflation vs. International E Equity | Dfa Inflation vs. Dfa Real Estate | Dfa Inflation vs. Emerging Markets E | Dfa Inflation vs. Dfa Five Year Global |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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