Correlation Between Dfa Us and Dfa Intl

Can any of the company-specific risk be diversified away by investing in both Dfa Us and Dfa Intl 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 Us and Dfa Intl 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 Intl Sustainability, you can compare the effects of market volatilities on Dfa Us and Dfa Intl 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 Us with a short position of Dfa Intl. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa Us and Dfa Intl.

Diversification Opportunities for Dfa Us and Dfa Intl

-0.3

Correlation Coefficient

Dfa Us  Dfa Intl

Very good diversification

The 3 months correlation between Dfa and Dfa is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Sustainability Core and Dfa Intl Sustainability in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Intl Sustainability and Dfa Us 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 Intl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Intl Sustainability has no effect on the direction of Dfa Us i.e., Dfa Us and Dfa Intl go up and down completely randomly.

Pair Corralation between Dfa Us and Dfa Intl

Assuming the 90 days horizon Dfa Sustainability Core is expected to generate 1.44 times more return on investment than Dfa Intl. However, Dfa Us is 1.44 times more volatile than Dfa Intl Sustainability. It trades about -0.18 of its potential returns per unit of risk. Dfa Intl Sustainability is currently generating about -0.39 per unit of risk. If you would invest  4,785  in Dfa Sustainability Core on October 7, 2024 and sell it today you would lose (172.00) from holding Dfa Sustainability Core or give up 3.59% of portfolio value over 90 days.

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

Dfa Sustainability Core  vs.  Dfa Intl Sustainability

Dfa Sustainability Core

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Sustainability Core are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Dfa Us is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dfa Intl Sustainability

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dfa Intl Sustainability 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.

Pair Trading with Dfa Us and Dfa Intl

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

The idea behind Dfa Sustainability Core and Dfa Intl Sustainability 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.