Correlation Between Dfa International and Pear Tree
Can any of the company-specific risk be diversified away by investing in both Dfa International and Pear Tree 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 International and Pear Tree into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dfa International Vector and Pear Tree Polaris, you can compare the effects of market volatilities on Dfa International and Pear Tree 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 International with a short position of Pear Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa International and Pear Tree.
Diversification Opportunities for Dfa International and Pear Tree
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dfa and Pear is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Dfa International Vector and Pear Tree Polaris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pear Tree Polaris and Dfa International 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 International Vector are associated (or correlated) with Pear Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pear Tree Polaris has no effect on the direction of Dfa International i.e., Dfa International and Pear Tree go up and down completely randomly.
Pair Corralation between Dfa International and Pear Tree
Assuming the 90 days horizon Dfa International Vector is expected to generate 1.0 times more return on investment than Pear Tree. However, Dfa International is 1.0 times more volatile than Pear Tree Polaris. It trades about -0.14 of its potential returns per unit of risk. Pear Tree Polaris is currently generating about -0.25 per unit of risk. If you would invest 1,414 in Dfa International Vector on August 27, 2024 and sell it today you would lose (31.00) from holding Dfa International Vector or give up 2.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dfa International Vector vs. Pear Tree Polaris
Performance |
| Timeline |
| Dfa International Vector |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Pear Tree Polaris |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Dfa International and Pear Tree Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dfa International and Pear Tree
The main advantage of trading using opposite Dfa International and Pear Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dfa International position performs unexpectedly, Pear Tree 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 Pear Tree will offset losses from the drop in Pear Tree's long position.| Dfa International vs. Angel Oak Ultrashort | Dfa International vs. Ultra Short Term Fixed | Dfa International vs. Siit Ultra Short | Dfa International vs. Maryland Short Term Tax Free |
| Pear Tree vs. Pear Tree Polaris | Pear Tree vs. Pear Tree Polaris | Pear Tree vs. Artisan International Value | Pear Tree vs. Rondure New World |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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