Correlation Between Dfa Inflation and International

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

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

Diversification Opportunities for Dfa Inflation and International

0.92

Correlation Coefficient

Dfa Inflation  International

Almost no diversification

The 3 months correlation between Dfa and International is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Inflation Protected and International E Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International E Equity and Dfa Inflation 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 Inflation Protected are associated (or correlated) with International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International E Equity has no effect on the direction of Dfa Inflation i.e., Dfa Inflation and International go up and down completely randomly.

Pair Corralation between Dfa Inflation and International

Assuming the 90 days horizon Dfa Inflation is expected to generate 2.18 times less return on investment than International. But when comparing it to its historical volatility, Dfa Inflation Protected is 3.19 times less risky than International. It trades about 0.23 of its potential returns per unit of risk. International E Equity is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,542  in International E Equity on December 30, 2024 and sell it today you would earn a total of  122.00  from holding International E Equity or generate 7.91% return on investment over 90 days.

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

Dfa Inflation Protected  vs.  International E Equity

Dfa Inflation Protected

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Inflation Protected are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Dfa Inflation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

International E Equity

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in International E Equity are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Dfa Inflation and International

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

The idea behind Dfa Inflation Protected and International E Equity 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.