Correlation Between Strategic Allocation: and Dfa Investment

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

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

Diversification Opportunities for Strategic Allocation: and Dfa Investment

0.24

Correlation Coefficient

Strategic Allocation:  Dfa Investment

Modest diversification

The 3 months correlation between Strategic and Dfa is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Allocation Moderate and Dfa Investment Dimensions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Investment Dimensions and Strategic Allocation: 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 Strategic Allocation Moderate are associated (or correlated) with Dfa Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Investment Dimensions has no effect on the direction of Strategic Allocation: i.e., Strategic Allocation: and Dfa Investment go up and down completely randomly.

Pair Corralation between Strategic Allocation: and Dfa Investment

Assuming the 90 days horizon Strategic Allocation: is expected to generate 3.09 times less return on investment than Dfa Investment. In addition to that, Strategic Allocation: is 16.96 times more volatile than Dfa Investment Dimensions. It trades about 0.01 of its total potential returns per unit of risk. Dfa Investment Dimensions is currently generating about 0.39 per unit of volatility. If you would invest  991.00  in Dfa Investment Dimensions on December 21, 2024 and sell it today you would earn a total of  8.00  from holding Dfa Investment Dimensions or generate 0.81% return on investment over 90 days.

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

Strategic Allocation Moderate  vs.  Dfa Investment Dimensions

Strategic Allocation:

Risk-Adjusted Performance

Very Weak

Over the last 90 days Strategic Allocation Moderate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Strategic Allocation: is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dfa Investment Dimensions

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Investment Dimensions are ranked lower than 30 (%) 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.

Pair Trading with Strategic Allocation: and Dfa Investment

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

The idea behind Strategic Allocation Moderate and Dfa Investment Dimensions 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.