Correlation Between International and Dfa Inflation

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

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

Diversification Opportunities for International and Dfa Inflation

0.92

Correlation Coefficient

International  Dfa Inflation

Almost no diversification

The 3 months correlation between International and Dfa is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding International E Equity and Dfa Inflation Protected in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Inflation Protected and International 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 International E Equity are associated (or correlated) with Dfa Inflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Inflation Protected has no effect on the direction of International i.e., International and Dfa Inflation go up and down completely randomly.

Pair Corralation between International and Dfa Inflation

Assuming the 90 days horizon International E Equity is expected to generate 3.19 times more return on investment than Dfa Inflation. However, International is 3.19 times more volatile than Dfa Inflation Protected. It trades about 0.16 of its potential returns per unit of risk. Dfa Inflation Protected is currently generating about 0.23 per unit of risk. If you would invest  1,542  in International E Equity on December 30, 2024 and sell it today you would earn a total of  122.00  from holding International E Equity or generate 7.91% return on investment over 90 days.

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

International E Equity  vs.  Dfa Inflation Protected

International E Equity

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in International E Equity are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Dfa Inflation Protected

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Inflation Protected are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Dfa Inflation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with International and Dfa Inflation

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

The idea behind International E Equity and Dfa Inflation Protected 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.