Correlation Between Large Cap and Dfa Selectively

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

By analyzing existing cross correlation between Large Cap International and Dfa Selectively Hedged, you can compare the effects of market volatilities on Large Cap and Dfa Selectively 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 Large Cap with a short position of Dfa Selectively. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large Cap and Dfa Selectively.

Diversification Opportunities for Large Cap and Dfa Selectively

-0.83

Correlation Coefficient

Large Cap  Dfa Selectively

Pay attention - limited upside

The 3 months correlation between Large and Dfa is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap International and Dfa Selectively Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Selectively Hedged and Large Cap 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 Large Cap International are associated (or correlated) with Dfa Selectively. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Selectively Hedged has no effect on the direction of Large Cap i.e., Large Cap and Dfa Selectively go up and down completely randomly.

Pair Corralation between Large Cap and Dfa Selectively

Assuming the 90 days horizon Large Cap International is expected to under-perform the Dfa Selectively. In addition to that, Large Cap is 18.45 times more volatile than Dfa Selectively Hedged. It trades about -0.23 of its total potential returns per unit of risk. Dfa Selectively Hedged is currently generating about 0.4 per unit of volatility. If you would invest  916.00  in Dfa Selectively Hedged on September 29, 2024 and sell it today you would earn a total of  3.00  from holding Dfa Selectively Hedged or generate 0.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Large Cap International  vs.  Dfa Selectively Hedged

Large Cap International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Large Cap International has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Dfa Selectively Hedged

Risk-Adjusted Performance

35 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Selectively Hedged are ranked lower than 35 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Dfa Selectively is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Large Cap and Dfa Selectively

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

The idea behind Large Cap International and Dfa Selectively Hedged 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.