Correlation Between Emerging Markets and Dimensional Retirement
Can any of the company-specific risk be diversified away by investing in both Emerging Markets and Dimensional Retirement 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 Emerging Markets and Dimensional Retirement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerging Markets Targeted and Dimensional Retirement Income, you can compare the effects of market volatilities on Emerging Markets and Dimensional Retirement 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 Emerging Markets with a short position of Dimensional Retirement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and Dimensional Retirement.
Diversification Opportunities for Emerging Markets and Dimensional Retirement
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Emerging and Dimensional is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Targeted and Dimensional Retirement Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Retirement and Emerging Markets 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 Emerging Markets Targeted are associated (or correlated) with Dimensional Retirement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Retirement has no effect on the direction of Emerging Markets i.e., Emerging Markets and Dimensional Retirement go up and down completely randomly.
Pair Corralation between Emerging Markets and Dimensional Retirement
Assuming the 90 days horizon Emerging Markets Targeted is expected to generate 2.71 times more return on investment than Dimensional Retirement. However, Emerging Markets is 2.71 times more volatile than Dimensional Retirement Income. It trades about 0.21 of its potential returns per unit of risk. Dimensional Retirement Income is currently generating about 0.21 per unit of risk. If you would invest 1,276 in Emerging Markets Targeted on June 6, 2025 and sell it today you would earn a total of 29.00 from holding Emerging Markets Targeted or generate 2.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerging Markets Targeted vs. Dimensional Retirement Income
Performance |
| Timeline |
| Emerging Markets Targeted |
| Dimensional Retirement |
Emerging Markets and Dimensional Retirement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerging Markets and Dimensional Retirement
The main advantage of trading using opposite Emerging Markets and Dimensional Retirement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Markets position performs unexpectedly, Dimensional Retirement 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 Dimensional Retirement will offset losses from the drop in Dimensional Retirement's long position.| Emerging Markets vs. Columbia Diversified Equity | Emerging Markets vs. Stone Ridge Diversified | Emerging Markets vs. Aqr Diversified Arbitrage | Emerging Markets vs. Vanguard Strategic Small Cap |
| Dimensional Retirement vs. Goldman Sachs Small | Dimensional Retirement vs. Small Cap Value Fund | Dimensional Retirement vs. Heartland Value Plus | Dimensional Retirement vs. Queens Road Small |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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