Correlation Between Dimensional 2060 and Emerging Markets

Can any of the company-specific risk be diversified away by investing in both Dimensional 2060 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 Dimensional 2060 and Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dimensional 2060 Target and Emerging Markets Small, you can compare the effects of market volatilities on Dimensional 2060 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 Dimensional 2060 with a short position of Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional 2060 and Emerging Markets.

Diversification Opportunities for Dimensional 2060 and Emerging Markets

0.99

Correlation Coefficient

Dimensional 2060  Emerging Markets

No risk reduction

The 3 months correlation between Dimensional and Emerging is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional 2060 Target and Emerging Markets Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets Small and Dimensional 2060 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 Dimensional 2060 Target 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 Small has no effect on the direction of Dimensional 2060 i.e., Dimensional 2060 and Emerging Markets go up and down completely randomly.

Pair Corralation between Dimensional 2060 and Emerging Markets

Assuming the 90 days horizon Dimensional 2060 is expected to generate 1.13 times less return on investment than Emerging Markets. But when comparing it to its historical volatility, Dimensional 2060 Target is 1.03 times less risky than Emerging Markets. It trades about 0.31 of its potential returns per unit of risk. Emerging Markets Small is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  2,311  in Emerging Markets Small on May 1, 2025 and sell it today you would earn a total of  323.00  from holding Emerging Markets Small or generate 13.98% return on investment over 90 days.

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

Dimensional 2060 Target  vs.  Emerging Markets Small

Dimensional 2060 Target

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional 2060 Target are ranked lower than 24 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Dimensional 2060 may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Emerging Markets Small

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Emerging Markets Small are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Emerging Markets showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dimensional 2060 and Emerging Markets

The main advantage of trading using opposite Dimensional 2060 and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional 2060 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 Dimensional 2060 Target and Emerging Markets Small 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.