Correlation Between Dfa - and Dfa Large

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

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

Diversification Opportunities for Dfa - and Dfa Large

0.74

Correlation Coefficient

Dfa -  Dfa Large

Poor diversification

The 3 months correlation between Dfa and Dfa is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Small and Dfa Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Large 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 Small are associated (or correlated) with Dfa Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Large has no effect on the direction of Dfa - i.e., Dfa - and Dfa Large go up and down completely randomly.

Pair Corralation between Dfa - and Dfa Large

Assuming the 90 days horizon Dfa Small is expected to under-perform the Dfa Large. In addition to that, Dfa - is 1.21 times more volatile than Dfa Large. It trades about -0.08 of its total potential returns per unit of risk. Dfa Large is currently generating about -0.04 per unit of volatility. If you would invest  3,885  in Dfa Large on December 27, 2024 and sell it today you would lose (96.00) from holding Dfa Large or give up 2.47% of portfolio value over 90 days.

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

Dfa Small  vs.  Dfa Large

Dfa Small

Risk-Adjusted Performance

Very Weak

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

Dfa Large

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dfa Large has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Dfa Large 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 Large

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

The idea behind Dfa Small and Dfa Large 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.