Correlation Between Dfa Intermediate and FlexShares Morningstar

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

By analyzing existing cross correlation between Dfa Intermediate Government and FlexShares Morningstar Global, you can compare the effects of market volatilities on Dfa Intermediate and FlexShares Morningstar 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 Intermediate with a short position of FlexShares Morningstar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa Intermediate and FlexShares Morningstar.

Diversification Opportunities for Dfa Intermediate and FlexShares Morningstar

0.56

Correlation Coefficient

Dfa Intermediate  FlexShares Morningstar

Very weak diversification

The 3 months correlation between Dfa and FlexShares is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Intermediate Government and FlexShares Morningstar Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Morningstar and Dfa Intermediate 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 Intermediate Government are associated (or correlated) with FlexShares Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Morningstar has no effect on the direction of Dfa Intermediate i.e., Dfa Intermediate and FlexShares Morningstar go up and down completely randomly.

Pair Corralation between Dfa Intermediate and FlexShares Morningstar

Assuming the 90 days horizon Dfa Intermediate is expected to generate 3.62 times less return on investment than FlexShares Morningstar. But when comparing it to its historical volatility, Dfa Intermediate Government is 2.51 times less risky than FlexShares Morningstar. It trades about 0.11 of its potential returns per unit of risk. FlexShares Morningstar Global is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  3,591  in FlexShares Morningstar Global on December 30, 2024 and sell it today you would earn a total of  281.00  from holding FlexShares Morningstar Global or generate 7.83% return on investment over 90 days.

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

Dfa Intermediate Government  vs.  FlexShares Morningstar Global

Dfa Intermediate Gov

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Intermediate Government are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Dfa Intermediate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

FlexShares Morningstar

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShares Morningstar Global are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, FlexShares Morningstar may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Dfa Intermediate and FlexShares Morningstar

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

The idea behind Dfa Intermediate Government and FlexShares Morningstar Global 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.