Correlation Between Us Micro and Dfa International

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

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

Diversification Opportunities for Us Micro and Dfa International

-0.71

Correlation Coefficient

Us Micro  Dfa International

Pay attention - limited upside

The 3 months correlation between DFSCX and Dfa is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Us Micro Cap and Dfa International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa International Small and Us Micro 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 Us Micro Cap are associated (or correlated) with Dfa International. 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 Small has no effect on the direction of Us Micro i.e., Us Micro and Dfa International go up and down completely randomly.

Pair Corralation between Us Micro and Dfa International

Assuming the 90 days horizon Us Micro Cap is expected to under-perform the Dfa International. In addition to that, Us Micro is 1.25 times more volatile than Dfa International Small. It trades about -0.15 of its total potential returns per unit of risk. Dfa International Small is currently generating about 0.24 per unit of volatility. If you would invest  2,190  in Dfa International Small on December 25, 2024 and sell it today you would earn a total of  276.00  from holding Dfa International Small or generate 12.6% return on investment over 90 days.

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

Us Micro Cap  vs.  Dfa International Small

Us Micro Cap

Risk-Adjusted Performance

Very Weak

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

Dfa International Small

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa International Small are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Dfa International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Us Micro and Dfa International

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

The idea behind Us Micro Cap and Dfa International Small 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.