Correlation Between Dfa Ca and Us Small

Can any of the company-specific risk be diversified away by investing in both Dfa Ca 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 Ca 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 Ca Int Tr and Us Small Cap, you can compare the effects of market volatilities on Dfa Ca 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 Ca with a short position of Us Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa Ca and Us Small.

Diversification Opportunities for Dfa Ca and Us Small

0.61

Correlation Coefficient

Dfa Ca  Us Small

Poor diversification

The 3 months correlation between Dfa and DFSVX is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Ca Int Tr 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 Ca 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 Ca Int Tr 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 Ca i.e., Dfa Ca and Us Small go up and down completely randomly.

Pair Corralation between Dfa Ca and Us Small

Assuming the 90 days horizon Dfa Ca is expected to generate 15.18 times less return on investment than Us Small. But when comparing it to its historical volatility, Dfa Ca Int Tr is 16.02 times less risky than Us Small. It trades about 0.21 of its potential returns per unit of risk. Us Small Cap is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  4,193  in Us Small Cap on April 24, 2025 and sell it today you would earn a total of  656.00  from holding Us Small Cap or generate 15.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Dfa Ca Int Tr  vs.  Us Small Cap

Dfa Ca Int

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Ca Int Tr are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Dfa Ca is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Us Small Cap

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Us Small Cap are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Us Small showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dfa Ca and Us Small

The main advantage of trading using opposite Dfa Ca and Us Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dfa Ca 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.

The idea behind Dfa Ca Int Tr and Us Small Cap 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.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.