Correlation Between Large Cap and Dfa -

Can any of the company-specific risk be diversified away by investing in both Large Cap and Dfa - 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 - 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 International, you can compare the effects of market volatilities on Large Cap and Dfa - 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 -. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large Cap and Dfa -.

Diversification Opportunities for Large Cap and Dfa -

0.94

Correlation Coefficient

Large Cap  Dfa -

Almost no diversification

The 3 months correlation between Large and Dfa is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap International and Dfa International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa International 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 -. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa International has no effect on the direction of Large Cap i.e., Large Cap and Dfa - go up and down completely randomly.

Pair Corralation between Large Cap and Dfa -

Assuming the 90 days horizon Large Cap International is expected to generate 1.07 times more return on investment than Dfa -. However, Large Cap is 1.07 times more volatile than Dfa International. It trades about 0.2 of its potential returns per unit of risk. Dfa International is currently generating about 0.08 per unit of risk. If you would invest  2,655  in Large Cap International on October 20, 2024 and sell it today you would earn a total of  57.00  from holding Large Cap International or generate 2.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.0%
Values	Daily Returns

Large Cap International  vs.  Dfa International

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 fairly strong essential indicators, Large Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dfa International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dfa International has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Dfa - 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 -

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

The idea behind Large Cap International and Dfa International 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.