Correlation Between Dfa World and Dfa -

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

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

Diversification Opportunities for Dfa World and Dfa -

0.42

Correlation Coefficient

Dfa World  Dfa -

Very weak diversification

The 3 months correlation between Dfa and Dfa is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Dfa World Ex and Dfa International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa International and Dfa World 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 World Ex are associated (or correlated) with Dfa -. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa International has no effect on the direction of Dfa World i.e., Dfa World and Dfa - go up and down completely randomly.

Pair Corralation between Dfa World and Dfa -

Assuming the 90 days horizon Dfa World Ex is expected to under-perform the Dfa -. But the mutual fund apears to be less risky and, when comparing its historical volatility, Dfa World Ex is 2.36 times less risky than Dfa -. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Dfa International is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,607  in Dfa International on December 26, 2024 and sell it today you would earn a total of  122.00  from holding Dfa International or generate 7.59% return on investment over 90 days.

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

Dfa World Ex  vs.  Dfa International

Dfa World Ex

Risk-Adjusted Performance

Very Weak

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

Dfa International

Risk-Adjusted Performance

Good

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

Pair Trading with Dfa World and Dfa -

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

The idea behind Dfa World Ex and Dfa International 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.