Correlation Between Dfa Emerging and Us Targeted

Can any of the company-specific risk be diversified away by investing in both Dfa Emerging and Us Targeted 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 Emerging and Us Targeted into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dfa Emerging Markets and Us Targeted Value, you can compare the effects of market volatilities on Dfa Emerging and Us Targeted 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 Emerging with a short position of Us Targeted. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa Emerging and Us Targeted.

Diversification Opportunities for Dfa Emerging and Us Targeted

0.75

Correlation Coefficient

Dfa Emerging  Us Targeted

Poor diversification

The 3 months correlation between Dfa and DFFVX is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Emerging Markets and Us Targeted Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Targeted Value and Dfa Emerging 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 Emerging Markets are associated (or correlated) with Us Targeted. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Targeted Value has no effect on the direction of Dfa Emerging i.e., Dfa Emerging and Us Targeted go up and down completely randomly.

Pair Corralation between Dfa Emerging and Us Targeted

Assuming the 90 days horizon Dfa Emerging Markets is expected to generate 0.56 times more return on investment than Us Targeted. However, Dfa Emerging Markets is 1.78 times less risky than Us Targeted. It trades about -0.08 of its potential returns per unit of risk. Us Targeted Value is currently generating about -0.12 per unit of risk. If you would invest  972.00  in Dfa Emerging Markets on January 11, 2025 and sell it today you would lose (58.00) from holding Dfa Emerging Markets or give up 5.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Dfa Emerging Markets  vs.  Us Targeted Value

Dfa Emerging Markets

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dfa Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Dfa Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Us Targeted Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Us Targeted Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Dfa Emerging and Us Targeted

The main advantage of trading using opposite Dfa Emerging and Us Targeted positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dfa Emerging position performs unexpectedly, Us Targeted 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 Us Targeted will offset losses from the drop in Us Targeted's long position.

The idea behind Dfa Emerging Markets and Us Targeted Value 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.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.