Correlation Between Dfa International and Dfa Investment
Can any of the company-specific risk be diversified away by investing in both Dfa International and Dfa Investment 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 Dfa Investment 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 Investment Grade, you can compare the effects of market volatilities on Dfa International and Dfa Investment 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 Dfa Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa International and Dfa Investment.
Diversification Opportunities for Dfa International and Dfa Investment
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dfa and Dfa is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Dfa International and Dfa Investment Grade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Investment Grade 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 are associated (or correlated) with Dfa Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Investment Grade has no effect on the direction of Dfa International i.e., Dfa International and Dfa Investment go up and down completely randomly.
Pair Corralation between Dfa International and Dfa Investment
Assuming the 90 days horizon Dfa International is expected to generate 2.49 times more return on investment than Dfa Investment. However, Dfa International is 2.49 times more volatile than Dfa Investment Grade. It trades about 0.04 of its potential returns per unit of risk. Dfa Investment Grade is currently generating about 0.06 per unit of risk. If you would invest 1,400 in Dfa International on August 31, 2024 and sell it today you would earn a total of 145.00 from holding Dfa International or generate 10.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dfa International vs. Dfa Investment Grade
Performance |
| Timeline |
| Dfa International |
| Dfa Investment Grade |
Dfa International and Dfa Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dfa International and Dfa Investment
The main advantage of trading using opposite Dfa International and Dfa Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dfa International position performs unexpectedly, Dfa Investment 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 Investment will offset losses from the drop in Dfa Investment's long position.| Dfa International vs. Dfa Small | Dfa International vs. Dfa Large | Dfa International vs. Dfa International | Dfa International vs. Emerging Markets Small |
| Dfa Investment vs. Vanguard Total Bond | Dfa Investment vs. Vanguard Total Bond | Dfa Investment vs. Vanguard Total Bond | Dfa Investment vs. Vanguard Total 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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