Correlation Between Us Large and Dfa Us

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

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

Diversification Opportunities for Us Large and Dfa Us

0.83

Correlation Coefficient

Us Large  Dfa Us

Very poor diversification

The 3 months correlation between DFUSX and Dfa is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Us Large Pany and Dfa Social Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Social Core and Us Large 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 Large Pany 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 Social Core has no effect on the direction of Us Large i.e., Us Large and Dfa Us go up and down completely randomly.

Pair Corralation between Us Large and Dfa Us

Assuming the 90 days horizon Us Large Pany is expected to generate 0.93 times more return on investment than Dfa Us. However, Us Large Pany is 1.07 times less risky than Dfa Us. It trades about -0.06 of its potential returns per unit of risk. Dfa Social Core is currently generating about -0.09 per unit of risk. If you would invest  3,888  in Us Large Pany on December 19, 2024 and sell it today you would lose (140.00) from holding Us Large Pany or give up 3.6% of portfolio value over 90 days.

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

Us Large Pany  vs.  Dfa Social Core

Us Large Pany

Risk-Adjusted Performance

Very Weak

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

Dfa Social Core

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dfa Social Core has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental 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 Us Large and Dfa Us

The main advantage of trading using opposite Us Large and Dfa Us positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Large 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 Us Large Pany and Dfa Social 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.