Correlation Between Dfa International and Us Lg

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

By analyzing existing cross correlation between Dfa International Value and Us Lg Cap, you can compare the effects of market volatilities on Dfa International and Us Lg 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 Us Lg. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa International and Us Lg.

Diversification Opportunities for Dfa International and Us Lg

-0.57

Correlation Coefficient

Dfa International  Us Lg

Excellent diversification

The 3 months correlation between Dfa and DUSQX is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Dfa International Value and Us Lg Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Lg Cap 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 Value are associated (or correlated) with Us Lg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Lg Cap has no effect on the direction of Dfa International i.e., Dfa International and Us Lg go up and down completely randomly.

Pair Corralation between Dfa International and Us Lg

Assuming the 90 days horizon Dfa International is expected to generate 1.82 times less return on investment than Us Lg. In addition to that, Dfa International is 1.04 times more volatile than Us Lg Cap. It trades about 0.06 of its total potential returns per unit of risk. Us Lg Cap is currently generating about 0.12 per unit of volatility. If you would invest  2,097  in Us Lg Cap on September 14, 2024 and sell it today you would earn a total of  1,251  from holding Us Lg Cap or generate 59.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Dfa International Value  vs.  Us Lg Cap

Dfa International Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dfa International Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Dfa International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Us Lg Cap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Us Lg Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Us Lg may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dfa International and Us Lg

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

The idea behind Dfa International Value and Us Lg Cap 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.