Correlation Between Dfa International and Us Small
Can any of the company-specific risk be diversified away by investing in both Dfa International and Us Small 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 Us Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dfa International and Us Small Cap, you can compare the effects of market volatilities on Dfa International and Us Small 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 Us Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa International and Us Small.
Diversification Opportunities for Dfa International and Us Small
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dfa and DFSTX is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Dfa International and Us Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Small Cap 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 Us Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Small Cap has no effect on the direction of Dfa International i.e., Dfa International and Us Small go up and down completely randomly.
Pair Corralation between Dfa International and Us Small
Assuming the 90 days horizon Dfa International is expected to generate 2.33 times less return on investment than Us Small. But when comparing it to its historical volatility, Dfa International is 1.38 times less risky than Us Small. It trades about 0.04 of its potential returns per unit of risk. Us Small Cap is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,818 in Us Small Cap on August 28, 2024 and sell it today you would earn a total of 1,536 from holding Us Small Cap or generate 40.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dfa International vs. Us Small Cap
Performance |
| Timeline |
| Dfa International |
| Us Small Cap |
Dfa International and Us Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dfa International and Us Small
The main advantage of trading using opposite Dfa International and Us Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dfa International position performs unexpectedly, Us Small 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 Us Small will offset losses from the drop in Us Small's long position.| Dfa International vs. Dfa Small | Dfa International vs. Dfa Large | Dfa International vs. Dfa International | Dfa International vs. Emerging Markets Small |
| Us Small vs. Intal High Relative | Us Small vs. Dfa International | Us Small vs. Dfa Inflation Protected | Us Small vs. Dfa International 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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