Correlation Between Dfa Short-duration and World Core

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

By analyzing existing cross correlation between Dfa Short Duration Real and World Core Equity, you can compare the effects of market volatilities on Dfa Short-duration and World Core 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 Short-duration with a short position of World Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa Short-duration and World Core.

Diversification Opportunities for Dfa Short-duration and World Core

0.32

Correlation Coefficient

Dfa Short-duration  World Core

Weak diversification

The 3 months correlation between Dfa and World is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Short Duration Real and World Core Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Core Equity and Dfa Short-duration 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 Short Duration Real are associated (or correlated) with World Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Core Equity has no effect on the direction of Dfa Short-duration i.e., Dfa Short-duration and World Core go up and down completely randomly.

Pair Corralation between Dfa Short-duration and World Core

Assuming the 90 days horizon Dfa Short-duration is expected to generate 11.64 times less return on investment than World Core. But when comparing it to its historical volatility, Dfa Short Duration Real is 10.35 times less risky than World Core. It trades about 0.32 of its potential returns per unit of risk. World Core Equity is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  2,364  in World Core Equity on April 25, 2025 and sell it today you would earn a total of  353.00  from holding World Core Equity or generate 14.93% return on investment over 90 days.

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

Dfa Short Duration Real  vs.  World Core Equity

Dfa Short Duration

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Short Duration Real are ranked lower than 25 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Dfa Short-duration is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

World Core Equity

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in World Core Equity are ranked lower than 28 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, World Core showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dfa Short-duration and World Core

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

The idea behind Dfa Short Duration Real and World Core Equity 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.