Correlation Between Dfa - and Dfa One

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

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

Diversification Opportunities for Dfa - and Dfa One

-0.63

Correlation Coefficient

Dfa -  Dfa One

Excellent diversification

The 3 months correlation between Dfa and Dfa is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Dfa International and Dfa One Year Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa One Year and Dfa - 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 International are associated (or correlated) with Dfa One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa One Year has no effect on the direction of Dfa - i.e., Dfa - and Dfa One go up and down completely randomly.

Pair Corralation between Dfa - and Dfa One

Assuming the 90 days horizon Dfa International is expected to under-perform the Dfa One. In addition to that, Dfa - is 11.65 times more volatile than Dfa One Year Fixed. It trades about -0.03 of its total potential returns per unit of risk. Dfa One Year Fixed is currently generating about 0.21 per unit of volatility. If you would invest  1,015  in Dfa One Year Fixed on September 4, 2024 and sell it today you would earn a total of  9.00  from holding Dfa One Year Fixed or generate 0.89% return on investment over 90 days.

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

Dfa International  vs.  Dfa One Year Fixed

Dfa International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dfa One Year

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa One Year Fixed are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Dfa One 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 - and Dfa One

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

The idea behind Dfa International and Dfa One Year Fixed 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.