Correlation Between Us Large and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Us Large and Emerging Markets 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 Us Large and Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Us Large Cap and Emerging Markets E, you can compare the effects of market volatilities on Us Large and Emerging Markets 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 Us Large with a short position of Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Large and Emerging Markets.
Diversification Opportunities for Us Large and Emerging Markets
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between DFLVX and Emerging is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Us Large Cap and Emerging Markets E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets E and Us Large 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 Us Large Cap are associated (or correlated) with Emerging Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets E has no effect on the direction of Us Large i.e., Us Large and Emerging Markets go up and down completely randomly.
Pair Corralation between Us Large and Emerging Markets
Assuming the 90 days horizon Us Large Cap is expected to generate 1.33 times more return on investment than Emerging Markets. However, Us Large is 1.33 times more volatile than Emerging Markets E. It trades about 0.22 of its potential returns per unit of risk. Emerging Markets E is currently generating about -0.18 per unit of risk. If you would invest 5,105 in Us Large Cap on August 28, 2024 and sell it today you would earn a total of 247.00 from holding Us Large Cap or generate 4.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Us Large Cap vs. Emerging Markets E
Performance |
| Timeline |
| Us Large Cap |
| Emerging Markets E |
Us Large and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Us Large and Emerging Markets
The main advantage of trading using opposite Us Large and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Large position performs unexpectedly, Emerging Markets 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 Emerging Markets will offset losses from the drop in Emerging Markets' long position.| Us Large vs. Dfa International Value | Us Large vs. Dfa International Small | Us Large vs. Us Small Cap | Us Large vs. Dfa Real Estate |
| Emerging Markets vs. International E Equity | Emerging Markets vs. Dfa International Small | Emerging Markets vs. Us E Equity | Emerging Markets vs. Us Large 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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