Correlation Between Dfa Ltip and Dfa Short-term

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

By analyzing existing cross correlation between Dfa Ltip Portfolio and Dfa Short Term Extended, you can compare the effects of market volatilities on Dfa Ltip and Dfa Short-term 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 Ltip with a short position of Dfa Short-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa Ltip and Dfa Short-term.

Diversification Opportunities for Dfa Ltip and Dfa Short-term

-0.48

Correlation Coefficient

Dfa Ltip  Dfa Short-term

Very good diversification

The 3 months correlation between Dfa and Dfa is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Ltip Portfolio and Dfa Short Term Extended in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Short Term and Dfa Ltip 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 Ltip Portfolio are associated (or correlated) with Dfa Short-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Short Term has no effect on the direction of Dfa Ltip i.e., Dfa Ltip and Dfa Short-term go up and down completely randomly.

Pair Corralation between Dfa Ltip and Dfa Short-term

Assuming the 90 days horizon Dfa Ltip Portfolio is expected to under-perform the Dfa Short-term. In addition to that, Dfa Ltip is 26.63 times more volatile than Dfa Short Term Extended. It trades about -0.05 of its total potential returns per unit of risk. Dfa Short Term Extended is currently generating about 0.41 per unit of volatility. If you would invest  1,038  in Dfa Short Term Extended on March 25, 2025 and sell it today you would earn a total of  13.00  from holding Dfa Short Term Extended or generate 1.25% return on investment over 90 days.

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

Dfa Ltip Portfolio  vs.  Dfa Short Term Extended

Dfa Ltip Portfolio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dfa Ltip Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Dfa Ltip is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dfa Short Term

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Short Term Extended are ranked lower than 31 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Dfa Short-term 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 Ltip and Dfa Short-term

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

The idea behind Dfa Ltip Portfolio and Dfa Short Term Extended 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.