Correlation Between Us Government and Dfa International

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

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

Diversification Opportunities for Us Government and Dfa International

-0.53

Correlation Coefficient

Us Government  Dfa International

Excellent diversification

The 3 months correlation between UGSDX and Dfa is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Securities 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 Us Government 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 Us Government Securities 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 Us Government i.e., Us Government and Dfa International go up and down completely randomly.

Pair Corralation between Us Government and Dfa International

Assuming the 90 days horizon Us Government is expected to generate 3.45 times less return on investment than Dfa International. But when comparing it to its historical volatility, Us Government Securities is 6.53 times less risky than Dfa International. It trades about 0.24 of its potential returns per unit of risk. Dfa International Real is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  327.00  in Dfa International Real on October 23, 2024 and sell it today you would earn a total of  6.00  from holding Dfa International Real or generate 1.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Us Government Securities  vs.  Dfa International Real

Us Government Securities

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Us Government Securities are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Us Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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 Us Government and Dfa International

The main advantage of trading using opposite Us Government and Dfa International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Government 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 Us Government Securities 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.