Correlation Between Vanguard Global and Dfa Global

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

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

Diversification Opportunities for Vanguard Global and Dfa Global

0.89

Correlation Coefficient

Vanguard Global  Dfa Global

Very poor diversification

The 3 months correlation between Vanguard and Dfa is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Global Ex Us and Dfa Global Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Global Real and Vanguard Global 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 Vanguard Global Ex Us are associated (or correlated) with Dfa Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Global Real has no effect on the direction of Vanguard Global i.e., Vanguard Global and Dfa Global go up and down completely randomly.

Pair Corralation between Vanguard Global and Dfa Global

Assuming the 90 days horizon Vanguard Global Ex Us is expected to under-perform the Dfa Global. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Global Ex Us is 1.08 times less risky than Dfa Global. The mutual fund trades about -0.44 of its potential returns per unit of risk. The Dfa Global Real is currently generating about -0.23 of returns per unit of risk over similar time horizon. If you would invest  1,068  in Dfa Global Real on October 7, 2024 and sell it today you would lose (52.00) from holding Dfa Global Real or give up 4.87% of portfolio value over 90 days.

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

Vanguard Global Ex Us  vs.  Dfa Global Real

Vanguard Global Ex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Global Ex Us 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 essential 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 Global Real

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Vanguard Global and Dfa Global

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

The idea behind Vanguard Global Ex Us and Dfa Global 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.