Correlation Between International Core and Dfa Real
Can any of the company-specific risk be diversified away by investing in both International Core and Dfa Real 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 Real 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 Real Estate, you can compare the effects of market volatilities on International Core and Dfa Real 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 Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Core and Dfa Real.
Diversification Opportunities for International Core and Dfa Real
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between International and Dfa is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding International E Equity and Dfa Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Real Estate 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 Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Real Estate has no effect on the direction of International Core i.e., International Core and Dfa Real go up and down completely randomly.
Pair Corralation between International Core and Dfa Real
Assuming the 90 days horizon International Core is expected to generate 1.33 times less return on investment than Dfa Real. But when comparing it to its historical volatility, International E Equity is 1.4 times less risky than Dfa Real. It trades about 0.05 of its potential returns per unit of risk. Dfa Real Estate is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3,551 in Dfa Real Estate on August 31, 2024 and sell it today you would earn a total of 908.00 from holding Dfa Real Estate or generate 25.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International E Equity vs. Dfa Real Estate
Performance |
| Timeline |
| International E Equity |
| Dfa Real Estate |
International Core and Dfa Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Core and Dfa Real
The main advantage of trading using opposite International Core and Dfa Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Core position performs unexpectedly, Dfa Real 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 Real will offset losses from the drop in Dfa Real'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 Real vs. Dfa International Small | Dfa Real vs. Us Large Cap | Dfa Real vs. International Small Pany | Dfa Real vs. Dfa International Value |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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