Correlation Between Dfa Targeted and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Dfa Targeted 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 Dfa Targeted and Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dfa Targeted Credit and Emerging Markets Value, you can compare the effects of market volatilities on Dfa Targeted 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 Dfa Targeted with a short position of Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa Targeted and Emerging Markets.
Diversification Opportunities for Dfa Targeted and Emerging Markets
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dfa and Emerging is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Targeted Credit and Emerging Markets Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets Value and Dfa Targeted 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 Dfa Targeted Credit 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 Value has no effect on the direction of Dfa Targeted i.e., Dfa Targeted and Emerging Markets go up and down completely randomly.
Pair Corralation between Dfa Targeted and Emerging Markets
Assuming the 90 days horizon Dfa Targeted is expected to generate 17.65 times less return on investment than Emerging Markets. But when comparing it to its historical volatility, Dfa Targeted Credit is 16.57 times less risky than Emerging Markets. It trades about 0.08 of its potential returns per unit of risk. Emerging Markets Value is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 3,043 in Emerging Markets Value on December 30, 2024 and sell it today you would earn a total of 54.00 from holding Emerging Markets Value or generate 1.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dfa Targeted Credit vs. Emerging Markets Value
Performance |
| Timeline |
| Dfa Targeted Credit |
| Emerging Markets Value |
Dfa Targeted and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dfa Targeted and Emerging Markets
The main advantage of trading using opposite Dfa Targeted and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dfa Targeted 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.| Dfa Targeted vs. Barings High Yield | ||
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| Emerging Markets 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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