Correlation Between Global Stock and Dfa Global

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

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

Diversification Opportunities for Global Stock and Dfa Global

0.96

Correlation Coefficient

Global Stock  Dfa Global

Almost no diversification

The 3 months correlation between Global and Dfa is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Global Stock Fund and Dfa Global Social in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Global Social and Global Stock 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 Global Stock Fund are associated (or correlated) with Dfa Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Global Social has no effect on the direction of Global Stock i.e., Global Stock and Dfa Global go up and down completely randomly.

Pair Corralation between Global Stock and Dfa Global

Assuming the 90 days horizon Global Stock Fund is expected to under-perform the Dfa Global. But the mutual fund apears to be less risky and, when comparing its historical volatility, Global Stock Fund is 1.05 times less risky than Dfa Global. The mutual fund trades about -0.14 of its potential returns per unit of risk. The Dfa Global Social is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  1,529  in Dfa Global Social on October 9, 2024 and sell it today you would lose (49.00) from holding Dfa Global Social or give up 3.2% of portfolio value over 90 days.

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

Global Stock Fund  vs.  Dfa Global Social

Global Stock

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dfa Global Social

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with Global Stock and Dfa Global

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

The idea behind Global Stock Fund and Dfa Global Social 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.