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 Core and Emerging Markets Sustainability, 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

0.97

Correlation Coefficient

Dfa Us  Emerging Markets

Almost no diversification

The 3 months correlation between Dfa and Emerging is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Sustainability Core and Emerging Markets Sustainabilit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets Sus 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 Core 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 Sus 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 Sustainability Core is expected to generate 1.03 times more return on investment than Emerging Markets. However, Dfa Us is 1.03 times more volatile than Emerging Markets Sustainability. It trades about 0.24 of its potential returns per unit of risk. Emerging Markets Sustainability is currently generating about 0.25 per unit of risk. If you would invest  4,466  in Dfa Sustainability Core on May 21, 2025 and sell it today you would earn a total of  487.00  from holding Dfa Sustainability Core or generate 10.9% return on investment over 90 days.

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

Dfa Sustainability Core  vs.  Emerging Markets Sustainabilit

Dfa Sustainability Core

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Sustainability Core are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Dfa Us may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Emerging Markets Sus

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Emerging Markets Sustainability are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Emerging Markets may actually be approaching a critical reversion point that can send shares even higher in September 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 Core and Emerging Markets Sustainability 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.