Correlation Between Dfa Investment and Causeway Emerging

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

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

Diversification Opportunities for Dfa Investment and Causeway Emerging

0.61

Correlation Coefficient

Dfa Investment  Causeway Emerging

Poor diversification

The 3 months correlation between Dfa and Causeway is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Investment Dimensions and Causeway Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Causeway Emerging Markets and Dfa Investment 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 Investment Dimensions are associated (or correlated) with Causeway Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Causeway Emerging Markets has no effect on the direction of Dfa Investment i.e., Dfa Investment and Causeway Emerging go up and down completely randomly.

Pair Corralation between Dfa Investment and Causeway Emerging

Assuming the 90 days horizon Dfa Investment is expected to generate 12.58 times less return on investment than Causeway Emerging. But when comparing it to its historical volatility, Dfa Investment Dimensions is 21.2 times less risky than Causeway Emerging. It trades about 0.44 of its potential returns per unit of risk. Causeway Emerging Markets is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  1,176  in Causeway Emerging Markets on May 22, 2025 and sell it today you would earn a total of  156.00  from holding Causeway Emerging Markets or generate 13.27% return on investment over 90 days.

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

Dfa Investment Dimensions  vs.  Causeway Emerging Markets

Dfa Investment Dimensions

Risk-Adjusted Performance

High

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Investment Dimensions are ranked lower than 34 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Dfa Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Causeway Emerging Markets

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Causeway Emerging Markets are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Causeway Emerging showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dfa Investment and Causeway Emerging

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

The idea behind Dfa Investment Dimensions and Causeway Emerging Markets 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.