Correlation Between Dfa International and Us Large

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

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

Diversification Opportunities for Dfa International and Us Large

-0.4

Correlation Coefficient

Dfa International  Us Large

Very good diversification

The 3 months correlation between Dfa and DFLVX is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Dfa International Small and Us Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Large Cap and Dfa International 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 Small are associated (or correlated) with Us Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Large Cap has no effect on the direction of Dfa International i.e., Dfa International and Us Large go up and down completely randomly.

Pair Corralation between Dfa International and Us Large

Assuming the 90 days horizon Dfa International is expected to generate 60.23 times less return on investment than Us Large. But when comparing it to its historical volatility, Dfa International Small is 1.09 times less risky than Us Large. It trades about 0.0 of its potential returns per unit of risk. Us Large Cap is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  5,031  in Us Large Cap on September 5, 2024 and sell it today you would earn a total of  268.00  from holding Us Large Cap or generate 5.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Dfa International Small  vs.  Us Large Cap

Dfa International Small

Risk-Adjusted Performance

0 of 100

Very Weak

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

Us Large Cap

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Dfa International and Us Large

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

The idea behind Dfa International Small and Us Large Cap 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.