Correlation Between Dfa Intl and Dfa Us

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

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

Diversification Opportunities for Dfa Intl and Dfa Us

-0.3

Correlation Coefficient

Dfa Intl  Dfa Us

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 Intl Sustainability and Dfa Sustainability Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Sustainability Core and Dfa Intl 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 Intl Sustainability are associated (or correlated) with Dfa Us. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Sustainability Core has no effect on the direction of Dfa Intl i.e., Dfa Intl and Dfa Us go up and down completely randomly.

Pair Corralation between Dfa Intl and Dfa Us

Assuming the 90 days horizon Dfa Intl Sustainability is expected to under-perform the Dfa Us. But the mutual fund apears to be less risky and, when comparing its historical volatility, Dfa Intl Sustainability is 1.44 times less risky than Dfa Us. The mutual fund trades about -0.39 of its potential returns per unit of risk. The Dfa Sustainability Core is currently generating about -0.18 of returns per unit of risk over similar time horizon. 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 Intl Sustainability  vs.  Dfa Sustainability Core

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.

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.

Pair Trading with Dfa Intl and Dfa Us

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

The idea behind Dfa Intl Sustainability and Dfa Sustainability Core 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.