Correlation Between World Ex and Dfa International
Can any of the company-specific risk be diversified away by investing in both World Ex 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 World Ex and Dfa International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between World Ex Core and Dfa International, you can compare the effects of market volatilities on World Ex 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 World Ex with a short position of Dfa International. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Ex and Dfa International.
Diversification Opportunities for World Ex and Dfa International
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between World and Dfa is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding World Ex Core and Dfa International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa International and World Ex 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 World Ex Core 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 has no effect on the direction of World Ex i.e., World Ex and Dfa International go up and down completely randomly.
Pair Corralation between World Ex and Dfa International
Assuming the 90 days horizon World Ex Core is expected to under-perform the Dfa International. But the mutual fund apears to be less risky and, when comparing its historical volatility, World Ex Core is 1.02 times less risky than Dfa International. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Dfa International is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,536 in Dfa International on September 1, 2024 and sell it today you would earn a total of 9.00 from holding Dfa International or generate 0.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
World Ex Core vs. Dfa International
Performance |
| Timeline |
| World Ex Core |
| Dfa International |
World Ex and Dfa International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with World Ex and Dfa International
The main advantage of trading using opposite World Ex and Dfa International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Ex 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.| World Ex vs. Dfa International | World Ex vs. Dfa Inflation Protected | World Ex vs. Dfa International Small | World Ex vs. Dfa International |
| Dfa International vs. Dfa Small | Dfa International vs. Dfa Large | Dfa International vs. Dfa International | Dfa International vs. Emerging Markets Small |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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