Correlation Between Dfa Inflation and Dfa International
Can any of the company-specific risk be diversified away by investing in both Dfa Inflation 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 Dfa Inflation and Dfa International 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 Dfa International, you can compare the effects of market volatilities on Dfa Inflation 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 Dfa Inflation with a short position of Dfa International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa Inflation and Dfa International.
Diversification Opportunities for Dfa Inflation and Dfa International
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dfa and Dfa is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Inflation Protected and Dfa International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa International 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 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 Dfa Inflation i.e., Dfa Inflation and Dfa International go up and down completely randomly.
Pair Corralation between Dfa Inflation and Dfa International
Assuming the 90 days horizon Dfa Inflation is expected to generate 2.48 times less return on investment than Dfa International. But when comparing it to its historical volatility, Dfa Inflation Protected is 2.6 times less risky than Dfa International. It trades about 0.08 of its potential returns per unit of risk. Dfa International is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,306 in Dfa International on September 1, 2024 and sell it today you would earn a total of 239.00 from holding Dfa International or generate 18.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.63% |
| Values | Daily Returns |
Dfa Inflation Protected vs. Dfa International
Performance |
| Timeline |
| Dfa Inflation Protected |
| Dfa International |
Dfa Inflation and Dfa International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dfa Inflation and Dfa International
The main advantage of trading using opposite Dfa Inflation and Dfa International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dfa Inflation 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.| 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 |
| 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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