Correlation Between Dfa Investment and International Core
Can any of the company-specific risk be diversified away by investing in both Dfa Investment and International Core 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 Investment and International Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dfa Investment Grade and International E Equity, you can compare the effects of market volatilities on Dfa Investment and International Core 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 Investment with a short position of International Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa Investment and International Core.
Diversification Opportunities for Dfa Investment and International Core
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dfa and International is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Investment Grade and International E Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International E Equity and Dfa Investment 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 Investment Grade are associated (or correlated) with International Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International E Equity has no effect on the direction of Dfa Investment i.e., Dfa Investment and International Core go up and down completely randomly.
Pair Corralation between Dfa Investment and International Core
Assuming the 90 days horizon Dfa Investment Grade is expected to generate 0.51 times more return on investment than International Core. However, Dfa Investment Grade is 1.97 times less risky than International Core. It trades about 0.1 of its potential returns per unit of risk. International E Equity is currently generating about -0.09 per unit of risk. If you would invest 1,006 in Dfa Investment Grade on August 31, 2024 and sell it today you would earn a total of 8.00 from holding Dfa Investment Grade or generate 0.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dfa Investment Grade vs. International E Equity
Performance |
| Timeline |
| Dfa Investment Grade |
| International E Equity |
Dfa Investment and International Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dfa Investment and International Core
The main advantage of trading using opposite Dfa Investment and International Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dfa Investment position performs unexpectedly, International Core 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 International Core will offset losses from the drop in International Core's long position.| Dfa Investment vs. Vanguard Total Bond | Dfa Investment vs. Vanguard Total Bond | Dfa Investment vs. Vanguard Total Bond | Dfa Investment vs. Vanguard Total Bond |
| International Core vs. Emerging Markets E | International Core vs. Us E Equity | International Core vs. Us E Equity | International Core vs. Dfa Real Estate |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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