Correlation Between Dfa International and Dfa Inflation
Can any of the company-specific risk be diversified away by investing in both Dfa International and Dfa Inflation 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 Inflation 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 Inflation Protected, you can compare the effects of market volatilities on Dfa International and Dfa Inflation 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 Inflation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa International and Dfa Inflation.
Diversification Opportunities for Dfa International and Dfa Inflation
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 International and Dfa Inflation Protected in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Inflation Protected 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 Inflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Inflation Protected has no effect on the direction of Dfa International i.e., Dfa International and Dfa Inflation go up and down completely randomly.
Pair Corralation between Dfa International and Dfa Inflation
Assuming the 90 days horizon Dfa International is expected to generate 2.6 times more return on investment than Dfa Inflation. However, Dfa International is 2.6 times more volatile than Dfa Inflation Protected. It trades about 0.08 of its potential returns per unit of risk. Dfa Inflation Protected is currently generating about 0.08 per unit of risk. 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 International vs. Dfa Inflation Protected
Performance |
| Timeline |
| Dfa International |
| Dfa Inflation Protected |
Dfa International and Dfa Inflation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dfa International and Dfa Inflation
The main advantage of trading using opposite Dfa International and Dfa Inflation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dfa International position performs unexpectedly, Dfa Inflation 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 Inflation will offset losses from the drop in Dfa Inflation'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 Inflation vs. International E Equity | Dfa Inflation vs. Dfa Real Estate | Dfa Inflation vs. Emerging Markets E | Dfa Inflation vs. Dfa Five Year Global |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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