Correlation Between Dfa - and Dfa Short

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

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

Diversification Opportunities for Dfa - and Dfa Short

0.87

Correlation Coefficient

Dfa -  Dfa Short

Very poor diversification

The 3 months correlation between Dfa and Dfa is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Small 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 - 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 Small are associated (or correlated) with Dfa Short. 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 - i.e., Dfa - and Dfa Short go up and down completely randomly.

Pair Corralation between Dfa - and Dfa Short

Assuming the 90 days horizon Dfa Small is expected to generate 15.17 times more return on investment than Dfa Short. However, Dfa - is 15.17 times more volatile than Dfa Short Term Extended. It trades about 0.1 of its potential returns per unit of risk. Dfa Short Term Extended is currently generating about 0.23 per unit of risk. If you would invest  2,696  in Dfa Small on May 4, 2025 and sell it today you would earn a total of  165.00  from holding Dfa Small or generate 6.12% return on investment over 90 days.

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

Dfa Small  vs.  Dfa Short Term Extended

Dfa Small

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Small are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Dfa - 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

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Short Term Extended are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Dfa Short 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 - and Dfa Short

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

The idea behind Dfa Small 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.

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.