Correlation Between Dfa Us and Us Small

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

By analyzing existing cross correlation between Dfa Sustainability Targeted and Us Small Cap, you can compare the effects of market volatilities on Dfa Us and Us Small 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 Us Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa Us and Us Small.

Diversification Opportunities for Dfa Us and Us Small

0.99

Correlation Coefficient

Dfa Us  Us Small

No risk reduction

The 3 months correlation between Dfa and DFSVX is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Sustainability Targeted and Us Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Small Cap 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 Targeted are associated (or correlated) with Us Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Small Cap has no effect on the direction of Dfa Us i.e., Dfa Us and Us Small go up and down completely randomly.

Pair Corralation between Dfa Us and Us Small

Assuming the 90 days horizon Dfa Sustainability Targeted is expected to generate 0.99 times more return on investment than Us Small. However, Dfa Sustainability Targeted is 1.01 times less risky than Us Small. It trades about -0.07 of its potential returns per unit of risk. Us Small Cap is currently generating about -0.08 per unit of risk. If you would invest  1,964  in Dfa Sustainability Targeted on December 28, 2024 and sell it today you would lose (97.00) from holding Dfa Sustainability Targeted or give up 4.94% of portfolio value over 90 days.

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

Dfa Sustainability Targeted  vs.  Us Small Cap

Dfa Sustainability

Risk-Adjusted Performance

Very Weak

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

Us Small Cap

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Dfa Us and Us Small

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

The idea behind Dfa Sustainability Targeted and Us Small Cap 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.