Correlation Between Dfa International and Pzena International

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

Diversification Opportunities for Dfa International and Pzena International

0.91

Correlation Coefficient

Dfa International  Pzena International

Almost no diversification

The 3 months correlation between Dfa and Pzena is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Dfa International Small and Pzena International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pzena International Small 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 Pzena International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pzena International Small has no effect on the direction of Dfa International i.e., Dfa International and Pzena International go up and down completely randomly.

Pair Corralation between Dfa International and Pzena International

Assuming the 90 days horizon Dfa International Small is expected to under-perform the Pzena International. But the mutual fund apears to be less risky and, when comparing its historical volatility, Dfa International Small is 1.01 times less risky than Pzena International. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Pzena International Small is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,215  in Pzena International Small on September 15, 2024 and sell it today you would lose (5.00) from holding Pzena International Small or give up 0.41% of portfolio value over 90 days.

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

Dfa International Small  vs.  Pzena International Small

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.

Pzena International Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pzena International Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Pzena International 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 International and Pzena International

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

The idea behind Dfa International Small and Pzena International Small 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 Transaction History module to view history of all your transactions and understand their impact on performance.