Correlation Between Dfa International and Japanese Small

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

By analyzing existing cross correlation between Dfa International and Japanese Small Pany, you can compare the effects of market volatilities on Dfa International and Japanese 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 Japanese Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa International and Japanese Small.

Diversification Opportunities for Dfa International and Japanese Small

0.24

Correlation Coefficient

Dfa International  Japanese Small

Modest diversification

The 3 months correlation between Dfa and Japanese is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Dfa International and Japanese Small Pany in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japanese Small Pany 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 are associated (or correlated) with Japanese Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japanese Small Pany has no effect on the direction of Dfa International i.e., Dfa International and Japanese Small go up and down completely randomly.

Pair Corralation between Dfa International and Japanese Small

Assuming the 90 days horizon Dfa International is expected to generate 3.47 times less return on investment than Japanese Small. But when comparing it to its historical volatility, Dfa International is 1.16 times less risky than Japanese Small. It trades about 0.08 of its potential returns per unit of risk. Japanese Small Pany is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  2,517  in Japanese Small Pany on May 27, 2025 and sell it today you would earn a total of  320.00  from holding Japanese Small Pany or generate 12.71% return on investment over 90 days.

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

Dfa International  vs.  Japanese Small Pany

Dfa International

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa International are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Dfa International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Japanese Small Pany

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Japanese Small Pany are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Japanese Small may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Dfa International and Japanese Small

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

The idea behind Dfa International and Japanese Small Pany 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.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.