Correlation Between Dfa Sustainability and Dfa Investment

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

By analyzing existing cross correlation between Dfa Sustainability Core and Dfa Investment Grade, you can compare the effects of market volatilities on Dfa Sustainability and Dfa Investment 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 Sustainability with a short position of Dfa Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa Sustainability and Dfa Investment.

Diversification Opportunities for Dfa Sustainability and Dfa Investment

-0.49

Correlation Coefficient

Dfa Sustainability  Dfa Investment

Very good diversification

The 3 months correlation between Dfa and Dfa is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Sustainability Core and Dfa Investment Grade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Investment Grade and Dfa Sustainability 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 Sustainability Core are associated (or correlated) with Dfa Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Investment Grade has no effect on the direction of Dfa Sustainability i.e., Dfa Sustainability and Dfa Investment go up and down completely randomly.

Pair Corralation between Dfa Sustainability and Dfa Investment

Assuming the 90 days horizon Dfa Sustainability Core is expected to generate 2.0 times more return on investment than Dfa Investment. However, Dfa Sustainability is 2.0 times more volatile than Dfa Investment Grade. It trades about 0.16 of its potential returns per unit of risk. Dfa Investment Grade is currently generating about -0.17 per unit of risk. If you would invest  4,368  in Dfa Sustainability Core on September 15, 2024 and sell it today you would earn a total of  348.00  from holding Dfa Sustainability Core or generate 7.97% return on investment over 90 days.

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

Dfa Sustainability Core  vs.  Dfa Investment Grade

Dfa Sustainability Core

Risk-Adjusted Performance

12 of 100

Good

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

Dfa Investment Grade

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Dfa Sustainability and Dfa Investment

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

The idea behind Dfa Sustainability Core and Dfa Investment Grade 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.