Correlation Between Dfa International and Us Micro

Can any of the company-specific risk be diversified away by investing in both Dfa International and Us Micro 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 Micro 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 Micro Cap, you can compare the effects of market volatilities on Dfa International and Us Micro 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 Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa International and Us Micro.

Diversification Opportunities for Dfa International and Us Micro

-0.68

Correlation Coefficient

Dfa International  Us Micro

Excellent diversification

The 3 months correlation between Dfa and DFSCX is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Dfa International Small and Us Micro Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Micro 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 Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Micro Cap has no effect on the direction of Dfa International i.e., Dfa International and Us Micro go up and down completely randomly.

Pair Corralation between Dfa International and Us Micro

Assuming the 90 days horizon Dfa International Small is expected to generate 0.78 times more return on investment than Us Micro. However, Dfa International Small is 1.28 times less risky than Us Micro. It trades about 0.23 of its potential returns per unit of risk. Us Micro Cap is currently generating about -0.1 per unit of risk. If you would invest  2,191  in Dfa International Small on December 28, 2024 and sell it today you would earn a total of  281.00  from holding Dfa International Small or generate 12.83% return on investment over 90 days.

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

Dfa International Small  vs.  Us Micro Cap

Dfa International Small

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa International Small are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Dfa International showed solid returns over the last few months and may actually be approaching a breakup point.

Us Micro Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Us Micro Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Dfa International and Us Micro

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

The idea behind Dfa International Small and Us Micro 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.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.