Correlation Between Dfa - and Dfa World
Can any of the company-specific risk be diversified away by investing in both Dfa - and Dfa World 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 - and Dfa World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dfa International and Dfa World Ex, you can compare the effects of market volatilities on Dfa - and Dfa World 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 - with a short position of Dfa World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa - and Dfa World.
Diversification Opportunities for Dfa - and Dfa World
Very poor diversification
The 3 months correlation between Dfa and Dfa is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Dfa International and Dfa World Ex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa World Ex and Dfa - 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 are associated (or correlated) with Dfa World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa World Ex has no effect on the direction of Dfa - i.e., Dfa - and Dfa World go up and down completely randomly.
Pair Corralation between Dfa - and Dfa World
Assuming the 90 days horizon Dfa International is expected to under-perform the Dfa World. In addition to that, Dfa - is 1.0 times more volatile than Dfa World Ex. It trades about -0.28 of its total potential returns per unit of risk. Dfa World Ex is currently generating about -0.23 per unit of volatility. If you would invest 1,525 in Dfa World Ex on January 5, 2025 and sell it today you would lose (116.00) from holding Dfa World Ex or give up 7.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dfa International vs. Dfa World Ex
Performance |
| Timeline |
| Dfa International |
| Dfa World Ex |
Dfa - and Dfa World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dfa - and Dfa World
The main advantage of trading using opposite Dfa - and Dfa World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dfa - position performs unexpectedly, Dfa World 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 World will offset losses from the drop in Dfa World's long position.The idea behind Dfa International and Dfa World Ex pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Dfa World vs. Intermediate Bond Fund | Dfa World vs. Ab Bond Inflation | Dfa World vs. Ab Bond Inflation | Dfa World vs. Ambrus Core Bond |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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