Correlation Between Dfa Selective and Dfa Emerging
Can any of the company-specific risk be diversified away by investing in both Dfa Selective and Dfa 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 Selective and Dfa Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dfa Selective State and Dfa Emerging Markets, you can compare the effects of market volatilities on Dfa Selective and Dfa 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 Selective with a short position of Dfa Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa Selective and Dfa Emerging.
Diversification Opportunities for Dfa Selective and Dfa Emerging
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dfa and Dfa is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Selective State and Dfa Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Emerging Markets and Dfa Selective 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 Selective State are associated (or correlated) with Dfa Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Emerging Markets has no effect on the direction of Dfa Selective i.e., Dfa Selective and Dfa Emerging go up and down completely randomly.
Pair Corralation between Dfa Selective and Dfa Emerging
Assuming the 90 days horizon Dfa Selective is expected to generate 8.0 times less return on investment than Dfa Emerging. But when comparing it to its historical volatility, Dfa Selective State is 8.96 times less risky than Dfa Emerging. It trades about 0.24 of its potential returns per unit of risk. Dfa Emerging Markets is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 1,565 in Dfa Emerging Markets on June 1, 2025 and sell it today you would earn a total of 152.00 from holding Dfa Emerging Markets or generate 9.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dfa Selective State vs. Dfa Emerging Markets
Performance |
| Timeline |
| Dfa Selective State |
| Dfa Emerging Markets |
Dfa Selective and Dfa Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dfa Selective and Dfa Emerging
The main advantage of trading using opposite Dfa Selective and Dfa Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dfa Selective position performs unexpectedly, Dfa 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 Dfa Emerging will offset losses from the drop in Dfa Emerging's long position.| Dfa Selective vs. Intal High Relative | Dfa Selective vs. Dfa International | Dfa Selective vs. Dfa Inflation Protected | Dfa Selective vs. Dfa International Small |
| Dfa Emerging vs. Goldman Sachs Financial | Dfa Emerging vs. John Hancock Financial | Dfa Emerging vs. Transamerica Financial Life | Dfa Emerging vs. Rmb Mendon Financial |
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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