Correlation Between Dfa Inflation and World Ex
Can any of the company-specific risk be diversified away by investing in both Dfa Inflation and World Ex 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 Inflation and World Ex into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dfa Inflation Protected and World Ex Core, you can compare the effects of market volatilities on Dfa Inflation and World Ex 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 Inflation with a short position of World Ex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa Inflation and World Ex.
Diversification Opportunities for Dfa Inflation and World Ex
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dfa and World is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Inflation Protected and World Ex Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Ex Core and Dfa Inflation 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 Inflation Protected are associated (or correlated) with World Ex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Ex Core has no effect on the direction of Dfa Inflation i.e., Dfa Inflation and World Ex go up and down completely randomly.
Pair Corralation between Dfa Inflation and World Ex
Assuming the 90 days horizon Dfa Inflation is expected to generate 6.59 times less return on investment than World Ex. But when comparing it to its historical volatility, Dfa Inflation Protected is 2.11 times less risky than World Ex. It trades about 0.02 of its potential returns per unit of risk. World Ex Core is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,161 in World Ex Core on August 26, 2024 and sell it today you would earn a total of 174.00 from holding World Ex Core or generate 14.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dfa Inflation Protected vs. World Ex Core
Performance |
| Timeline |
| Dfa Inflation Protected |
| World Ex Core |
Dfa Inflation and World Ex Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dfa Inflation and World Ex
The main advantage of trading using opposite Dfa Inflation and World Ex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dfa Inflation position performs unexpectedly, World Ex 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 World Ex will offset losses from the drop in World Ex's long position.| Dfa Inflation vs. International E Equity | Dfa Inflation vs. Dfa Real Estate | Dfa Inflation vs. Emerging Markets E | Dfa Inflation vs. Dfa Five Year Global |
| World Ex vs. Dfa Inflation Protected | World Ex vs. Dfa International Small | World Ex vs. Dfa International | World Ex vs. Dfa Municipal Real |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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