Correlation Between Harding Loevner and Dfa International

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

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

Diversification Opportunities for Harding Loevner and Dfa International

0.82

Correlation Coefficient

Harding Loevner  Dfa International

Very poor diversification

The 3 months correlation between Harding and Dfa is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Harding Loevner Emerging and Dfa International Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa International Real and Harding Loevner 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 Harding Loevner Emerging are associated (or correlated) with Dfa International. 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 Real has no effect on the direction of Harding Loevner i.e., Harding Loevner and Dfa International go up and down completely randomly.

Pair Corralation between Harding Loevner and Dfa International

Assuming the 90 days horizon Harding Loevner Emerging is expected to under-perform the Dfa International. In addition to that, Harding Loevner is 2.29 times more volatile than Dfa International Real. It trades about -0.18 of its total potential returns per unit of risk. Dfa International Real is currently generating about -0.18 per unit of volatility. If you would invest  359.00  in Dfa International Real on October 23, 2024 and sell it today you would lose (30.00) from holding Dfa International Real or give up 8.36% of portfolio value over 90 days.

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

Harding Loevner Emerging  vs.  Dfa International Real

Harding Loevner Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harding Loevner Emerging has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's primary indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Dfa International Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dfa International Real has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic 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 Harding Loevner and Dfa International

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

The idea behind Harding Loevner Emerging and Dfa International Real 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.