Correlation Between Dfa Us and Emerging Markets

Can any of the company-specific risk be diversified away by investing in both Dfa Us 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 Us 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 Sustainability Targeted and Emerging Markets Portfolio, you can compare the effects of market volatilities on Dfa Us 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 Us with a short position of Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa Us and Emerging Markets.

Diversification Opportunities for Dfa Us and Emerging Markets

0.8

Correlation Coefficient

Dfa Us  Emerging Markets

Very poor diversification

The 3 months correlation between Dfa and Emerging is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Sustainability Targeted and Emerging Markets Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets Por and Dfa Us 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 Sustainability Targeted 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 Por has no effect on the direction of Dfa Us i.e., Dfa Us and Emerging Markets go up and down completely randomly.

Pair Corralation between Dfa Us and Emerging Markets

Assuming the 90 days horizon Dfa Us is expected to generate 1.03 times less return on investment than Emerging Markets. In addition to that, Dfa Us is 1.96 times more volatile than Emerging Markets Portfolio. It trades about 0.12 of its total potential returns per unit of risk. Emerging Markets Portfolio is currently generating about 0.24 per unit of volatility. If you would invest  3,262  in Emerging Markets Portfolio on June 28, 2025 and sell it today you would earn a total of  306.00  from holding Emerging Markets Portfolio or generate 9.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Dfa Sustainability Targeted  vs.  Emerging Markets Portfolio

Dfa Sustainability

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Sustainability Targeted are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental drivers, Dfa Us may actually be approaching a critical reversion point that can send shares even higher in October 2025.

Emerging Markets Por

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Emerging Markets Portfolio are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Emerging Markets may actually be approaching a critical reversion point that can send shares even higher in October 2025.

Pair Trading with Dfa Us and Emerging Markets

The main advantage of trading using opposite Dfa Us and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dfa Us 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.

The idea behind Dfa Sustainability Targeted and Emerging Markets Portfolio pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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.