Correlation Between Dfa World and Dfa International
Can any of the company-specific risk be diversified away by investing in both Dfa World 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 World 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 World Ex and Dfa International Small, you can compare the effects of market volatilities on Dfa World 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 World with a short position of Dfa International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa World and Dfa International.
Diversification Opportunities for Dfa World and Dfa International
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dfa and Dfa is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Dfa World Ex and Dfa International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa International Small and Dfa World 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 World Ex 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 Small has no effect on the direction of Dfa World i.e., Dfa World and Dfa International go up and down completely randomly.
Pair Corralation between Dfa World and Dfa International
Assuming the 90 days horizon Dfa World Ex is expected to under-perform the Dfa International. But the mutual fund apears to be less risky and, when comparing its historical volatility, Dfa World Ex is 1.15 times less risky than Dfa International. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Dfa International Small is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 2,278 in Dfa International Small on September 5, 2024 and sell it today you would earn a total of 0.00 from holding Dfa International Small or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dfa World Ex vs. Dfa International Small
Performance |
| Timeline |
| Dfa World Ex |
| Dfa International Small |
Dfa World and Dfa International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dfa World and Dfa International
The main advantage of trading using opposite Dfa World and Dfa International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dfa World 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 World vs. Intal High Relative | Dfa World vs. Dfa International | Dfa World vs. Dfa Inflation Protected | Dfa World vs. Dfa International Small |
| Dfa International vs. Dfa International Value | Dfa International vs. International Small Pany | Dfa International vs. Us Large Cap | Dfa International vs. Us Small Cap |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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