Correlation Between Dfa International and Vanguard Global

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

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

Diversification Opportunities for Dfa International and Vanguard Global

0.96

Correlation Coefficient

Dfa International  Vanguard Global

Almost no diversification

The 3 months correlation between Dfa and Vanguard is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Dfa International Real and Vanguard Global Ex Us in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Global Ex and Dfa 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 Dfa International Real are associated (or correlated) with Vanguard Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Global Ex has no effect on the direction of Dfa International i.e., Dfa International and Vanguard Global go up and down completely randomly.

Pair Corralation between Dfa International and Vanguard Global

Assuming the 90 days horizon Dfa International Real is expected to generate 0.84 times more return on investment than Vanguard Global. However, Dfa International Real is 1.2 times less risky than Vanguard Global. It trades about -0.25 of its potential returns per unit of risk. Vanguard Global Ex Us is currently generating about -0.44 per unit of risk. If you would invest  343.00  in Dfa International Real on October 7, 2024 and sell it today you would lose (14.00) from holding Dfa International Real or give up 4.08% of portfolio value over 90 days.

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

Dfa International Real  vs.  Vanguard Global Ex Us

Dfa International Real

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vanguard Global Ex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Global Ex Us has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's essential indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Dfa International and Vanguard Global

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

The idea behind Dfa International Real and Vanguard Global Ex Us 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.