Correlation Between Dfa - and Continental Small
Can any of the company-specific risk be diversified away by investing in both Dfa - and Continental 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 - and Continental Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dfa Large and Continental Small Pany, you can compare the effects of market volatilities on Dfa - and Continental 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 - with a short position of Continental Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa - and Continental Small.
Diversification Opportunities for Dfa - and Continental Small
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dfa and Continental is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Large and Continental Small Pany in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental Small Pany and Dfa - 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 Large are associated (or correlated) with Continental Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Continental Small Pany has no effect on the direction of Dfa - i.e., Dfa - and Continental Small go up and down completely randomly.
Pair Corralation between Dfa - and Continental Small
Assuming the 90 days horizon Dfa Large is expected to generate 0.86 times more return on investment than Continental Small. However, Dfa Large is 1.16 times less risky than Continental Small. It trades about 0.14 of its potential returns per unit of risk. Continental Small Pany is currently generating about 0.03 per unit of risk. If you would invest 2,720 in Dfa Large on August 31, 2024 and sell it today you would earn a total of 1,283 from holding Dfa Large or generate 47.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dfa Large vs. Continental Small Pany
Performance |
| Timeline |
| Dfa Large |
| Continental Small Pany |
Dfa - and Continental Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dfa - and Continental Small
The main advantage of trading using opposite Dfa - and Continental Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dfa - position performs unexpectedly, Continental 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 Continental Small will offset losses from the drop in Continental Small's long position.The idea behind Dfa Large and Continental Small Pany pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Continental Small vs. Vanguard Pacific Stock | Continental Small vs. Vanguard Emerging Markets | Continental Small vs. Vanguard Reit Index | Continental Small vs. Vanguard Small Cap Index |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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