Correlation Between International Core and Dfa International
Can any of the company-specific risk be diversified away by investing in both International Core 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 International Core and Dfa International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International E Equity and Dfa International Real, you can compare the effects of market volatilities on International Core 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 International Core with a short position of Dfa International. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Core and Dfa International.
Diversification Opportunities for International Core and Dfa International
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between International and Dfa is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding International E Equity 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 International Core 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 International E Equity 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 International Core i.e., International Core and Dfa International go up and down completely randomly.
Pair Corralation between International Core and Dfa International
Assuming the 90 days horizon International E Equity is expected to generate 0.91 times more return on investment than Dfa International. However, International E Equity is 1.1 times less risky than Dfa International. It trades about 0.06 of its potential returns per unit of risk. Dfa International Real is currently generating about 0.01 per unit of risk. If you would invest 1,308 in International E Equity on December 1, 2024 and sell it today you would earn a total of 329.00 from holding International E Equity or generate 25.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International E Equity vs. Dfa International Real
Performance |
| Timeline |
| International E Equity |
| Dfa International Real |
International Core and Dfa International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Core and Dfa International
The main advantage of trading using opposite International Core and Dfa International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Core 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.| International Core vs. Emerging Markets E | International Core vs. Us E Equity | International Core vs. Us E Equity | International Core vs. Dfa Real Estate |
| Dfa International vs. Scout E Bond | Dfa International vs. Nationwide Bond Index | Dfa International vs. Versatile Bond Portfolio | Dfa International vs. Artisan High Income |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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