Correlation Between Touchstone International and Dfa International
Can any of the company-specific risk be diversified away by investing in both Touchstone International 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 Touchstone International and Dfa International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Touchstone International Equity and Dfa International Social, you can compare the effects of market volatilities on Touchstone International 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 Touchstone International with a short position of Dfa International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touchstone International and Dfa International.
Diversification Opportunities for Touchstone International and Dfa International
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Touchstone and Dfa is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone International Equit and Dfa International Social in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa International Social and Touchstone 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 Touchstone International Equity 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 Social has no effect on the direction of Touchstone International i.e., Touchstone International and Dfa International go up and down completely randomly.
Pair Corralation between Touchstone International and Dfa International
Assuming the 90 days horizon Touchstone International is expected to generate 2.8 times less return on investment than Dfa International. But when comparing it to its historical volatility, Touchstone International Equity is 1.32 times less risky than Dfa International. It trades about 0.05 of its potential returns per unit of risk. Dfa International Social is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,471 in Dfa International Social on September 13, 2024 and sell it today you would earn a total of 24.00 from holding Dfa International Social or generate 1.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Touchstone International Equit vs. Dfa International Social
Performance |
| Timeline |
| Touchstone International |
| Dfa International Social |
Touchstone International and Dfa International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Touchstone International and Dfa International
The main advantage of trading using opposite Touchstone International and Dfa International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Touchstone International 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.| Touchstone International vs. Guidemark Smallmid Cap | Touchstone International vs. Glg Intl Small | Touchstone International vs. Cardinal Small Cap | Touchstone International vs. Small Pany Growth |
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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