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 Social and Us Large Pany, 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

0.6

Correlation Coefficient

Dfa International  Us Large

Poor diversification

The 3 months correlation between Dfa and DFUSX is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Dfa International Social and Us Large Pany in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Large Pany 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 Social 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 Pany 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 Social is expected to generate 0.76 times more return on investment than Us Large. However, Dfa International Social is 1.31 times less risky than Us Large. It trades about 0.26 of its potential returns per unit of risk. Us Large Pany is currently generating about -0.12 per unit of risk. If you would invest  1,477  in Dfa International Social on December 4, 2024 and sell it today you would earn a total of  54.00  from holding Dfa International Social or generate 3.66% return on investment over 90 days.

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

Dfa International Social  vs.  Us Large Pany

Dfa International Social

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa International Social are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential 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 Pany

Risk-Adjusted Performance

Very Weak

Over the last 90 days Us Large Pany has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Us 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 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 Social and Us Large Pany 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..