Correlation Between Dfa Inflation and Dfa Large

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

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

Diversification Opportunities for Dfa Inflation and Dfa Large

0.57

Correlation Coefficient

Dfa Inflation  Dfa Large

Very weak diversification

The 3 months correlation between Dfa and Dfa is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Inflation Protected and Dfa Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Large and Dfa Inflation 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 Inflation Protected are associated (or correlated) with Dfa Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Large has no effect on the direction of Dfa Inflation i.e., Dfa Inflation and Dfa Large go up and down completely randomly.

Pair Corralation between Dfa Inflation and Dfa Large

Assuming the 90 days horizon Dfa Inflation is expected to generate 5.24 times less return on investment than Dfa Large. But when comparing it to its historical volatility, Dfa Inflation Protected is 3.06 times less risky than Dfa Large. It trades about 0.12 of its potential returns per unit of risk. Dfa Large is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  3,751  in Dfa Large on May 3, 2025 and sell it today you would earn a total of  388.00  from holding Dfa Large or generate 10.34% return on investment over 90 days.

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

Dfa Inflation Protected  vs.  Dfa Large

Dfa Inflation Protected

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Inflation Protected are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Dfa Inflation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dfa Large

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Large are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Dfa Large may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Dfa Inflation and Dfa Large

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

The idea behind Dfa Inflation Protected and Dfa Large 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.