Correlation Between Vanguard Total and Dfa Us

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

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

Diversification Opportunities for Vanguard Total and Dfa Us

0.93

Correlation Coefficient

Vanguard Total  Dfa Us

Almost no diversification

The 3 months correlation between Vanguard and Dfa is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and Dfa Sustainability Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Sustainability Core and Vanguard Total 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 Total Stock are associated (or correlated) with Dfa Us. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Sustainability Core has no effect on the direction of Vanguard Total i.e., Vanguard Total and Dfa Us go up and down completely randomly.

Pair Corralation between Vanguard Total and Dfa Us

Assuming the 90 days horizon Vanguard Total Stock is expected to under-perform the Dfa Us. In addition to that, Vanguard Total is 1.0 times more volatile than Dfa Sustainability Core. It trades about -0.1 of its total potential returns per unit of risk. Dfa Sustainability Core is currently generating about -0.09 per unit of volatility. If you would invest  4,622  in Dfa Sustainability Core on December 21, 2024 and sell it today you would lose (261.00) from holding Dfa Sustainability Core or give up 5.65% of portfolio value over 90 days.

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

Vanguard Total Stock  vs.  Dfa Sustainability Core

Vanguard Total Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Total Stock has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Dfa Sustainability Core

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dfa Sustainability Core has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Dfa Us 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 Total and Dfa Us

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

The idea behind Vanguard Total Stock and Dfa Sustainability Core 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.