Correlation Between Dfa International and Us Small

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

Diversification Opportunities for Dfa International and Us Small

0.85

Correlation Coefficient

Dfa International  Us Small

Very poor diversification

The 3 months correlation between Dfa and DFSVX is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Dfa International Value 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 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 Dfa International Value 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 International i.e., Dfa International and Us Small go up and down completely randomly.

Pair Corralation between Dfa International and Us Small

Assuming the 90 days horizon Dfa International Value is expected to generate 0.66 times more return on investment than Us Small. However, Dfa International Value is 1.51 times less risky than Us Small. It trades about 0.22 of its potential returns per unit of risk. Us Small Cap is currently generating about 0.05 per unit of risk. If you would invest  2,353  in Dfa International Value on May 13, 2025 and sell it today you would earn a total of  244.00  from holding Dfa International Value or generate 10.37% return on investment over 90 days.

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

Dfa International Value  vs.  Us Small Cap

Dfa International Value

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa International Value are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Dfa International may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Us Small Cap

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Us Small Cap are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Us Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dfa International and Us Small

The main advantage of trading using opposite Dfa International and Us Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dfa International 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 International Value 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.