Correlation Between Dfa Global and Global Equity

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

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

Diversification Opportunities for Dfa Global and Global Equity

0.89

Correlation Coefficient

Dfa Global  Global Equity

Very poor diversification

The 3 months correlation between Dfa and Global is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Global Social and Global Equity Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Equity Portfolio and Dfa Global 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 Global Social are associated (or correlated) with Global Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Equity Portfolio has no effect on the direction of Dfa Global i.e., Dfa Global and Global Equity go up and down completely randomly.

Pair Corralation between Dfa Global and Global Equity

Assuming the 90 days horizon Dfa Global Social is expected to under-perform the Global Equity. In addition to that, Dfa Global is 1.05 times more volatile than Global Equity Portfolio. It trades about 0.0 of its total potential returns per unit of risk. Global Equity Portfolio is currently generating about 0.0 per unit of volatility. If you would invest  3,386  in Global Equity Portfolio on December 19, 2024 and sell it today you would lose (13.00) from holding Global Equity Portfolio or give up 0.38% of portfolio value over 90 days.

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

Dfa Global Social  vs.  Global Equity Portfolio

Dfa Global Social

Risk-Adjusted Performance

Very Weak

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

Global Equity Portfolio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global Equity Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Global Equity 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 Global and Global Equity

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

The idea behind Dfa Global Social and Global Equity Portfolio 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.