Correlation Between Us Small and Dfa International
Can any of the company-specific risk be diversified away by investing in both Us Small 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 Us Small and Dfa International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Us Small Cap and Dfa International Value, you can compare the effects of market volatilities on Us Small 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 Us Small with a short position of Dfa International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Small and Dfa International.
Diversification Opportunities for Us Small and Dfa International
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between DFSVX and Dfa is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Us Small Cap and Dfa International Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa International Value and Us Small 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 Us Small Cap 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 Value has no effect on the direction of Us Small i.e., Us Small and Dfa International go up and down completely randomly.
Pair Corralation between Us Small and Dfa International
Assuming the 90 days horizon Us Small Cap is expected to generate 2.06 times more return on investment than Dfa International. However, Us Small is 2.06 times more volatile than Dfa International Value. It trades about 0.17 of its potential returns per unit of risk. Dfa International Value is currently generating about -0.17 per unit of risk. If you would invest 4,846 in Us Small Cap on August 28, 2024 and sell it today you would earn a total of 493.00 from holding Us Small Cap or generate 10.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Us Small Cap vs. Dfa International Value
Performance |
| Timeline |
| Us Small Cap |
| Dfa International Value |
Us Small and Dfa International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Us Small and Dfa International
The main advantage of trading using opposite Us Small and Dfa International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Small 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.| Us Small vs. Us Micro Cap | Us Small vs. Dfa International Small | Us Small vs. Us Large Cap | Us Small vs. International Small Pany |
| Dfa International vs. Us Large Cap | Dfa International vs. Dfa International Small | Dfa International vs. International Small Pany | Dfa International vs. Dfa Five Year Global |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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