Correlation Between Western Asset and Dfa Emerging
Can any of the company-specific risk be diversified away by investing in both Western Asset and Dfa Emerging 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 Western Asset and Dfa Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset High and Dfa Emerging Markets, you can compare the effects of market volatilities on Western Asset and Dfa Emerging 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 Western Asset with a short position of Dfa Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Dfa Emerging.
Diversification Opportunities for Western Asset and Dfa Emerging
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Western and Dfa is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High and Dfa Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Emerging Markets and Western Asset 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 Western Asset High are associated (or correlated) with Dfa Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Emerging Markets has no effect on the direction of Western Asset i.e., Western Asset and Dfa Emerging go up and down completely randomly.
Pair Corralation between Western Asset and Dfa Emerging
Assuming the 90 days horizon Western Asset is expected to generate 1.32 times less return on investment than Dfa Emerging. But when comparing it to its historical volatility, Western Asset High is 2.39 times less risky than Dfa Emerging. It trades about 0.1 of its potential returns per unit of risk. Dfa Emerging Markets is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,215 in Dfa Emerging Markets on September 2, 2024 and sell it today you would earn a total of 277.00 from holding Dfa Emerging Markets or generate 22.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset High vs. Dfa Emerging Markets
Performance |
| Timeline |
| Western Asset High |
| Dfa Emerging Markets |
Western Asset and Dfa Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Dfa Emerging
The main advantage of trading using opposite Western Asset and Dfa Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Dfa Emerging 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 Emerging will offset losses from the drop in Dfa Emerging's long position.| Western Asset vs. Transamerica Emerging Markets | Western Asset vs. Pnc Emerging Markets | Western Asset vs. Locorr Market Trend | Western Asset vs. Aqr Sustainable Long Short |
| Dfa Emerging vs. Pace High Yield | Dfa Emerging vs. Western Asset High | Dfa Emerging vs. Msift High Yield | Dfa Emerging vs. Prudential Short Duration |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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