Correlation Between Dfa Commodity and Financials Ultrasector

Can any of the company-specific risk be diversified away by investing in both Dfa Commodity and Financials Ultrasector 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 Commodity and Financials Ultrasector into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dfa Commodity Strategy and Financials Ultrasector Profund, you can compare the effects of market volatilities on Dfa Commodity and Financials Ultrasector 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 Commodity with a short position of Financials Ultrasector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa Commodity and Financials Ultrasector.

Diversification Opportunities for Dfa Commodity and Financials Ultrasector

0.41

Correlation Coefficient

Dfa Commodity  Financials Ultrasector

Very weak diversification

The 3 months correlation between Dfa and Financials is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Commodity Strategy and Financials Ultrasector Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financials Ultrasector and Dfa Commodity 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 Commodity Strategy are associated (or correlated) with Financials Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financials Ultrasector has no effect on the direction of Dfa Commodity i.e., Dfa Commodity and Financials Ultrasector go up and down completely randomly.

Pair Corralation between Dfa Commodity and Financials Ultrasector

Assuming the 90 days horizon Dfa Commodity is expected to generate 4.78 times less return on investment than Financials Ultrasector. But when comparing it to its historical volatility, Dfa Commodity Strategy is 1.79 times less risky than Financials Ultrasector. It trades about 0.09 of its potential returns per unit of risk. Financials Ultrasector Profund is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  3,754  in Financials Ultrasector Profund on April 20, 2025 and sell it today you would earn a total of  846.00  from holding Financials Ultrasector Profund or generate 22.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Dfa Commodity Strategy  vs.  Financials Ultrasector Profund

Dfa Commodity Strategy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Commodity Strategy are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Dfa Commodity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Financials Ultrasector

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Financials Ultrasector Profund are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Financials Ultrasector showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dfa Commodity and Financials Ultrasector

The main advantage of trading using opposite Dfa Commodity and Financials Ultrasector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dfa Commodity position performs unexpectedly, Financials Ultrasector 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 Financials Ultrasector will offset losses from the drop in Financials Ultrasector's long position.

The idea behind Dfa Commodity Strategy and Financials Ultrasector Profund 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.