Correlation Between Dfa - and Dfa -

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

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

Diversification Opportunities for Dfa - and Dfa -

0.92

Correlation Coefficient

Dfa -  Dfa -

Almost no diversification

The 3 months correlation between Dfa and Dfa is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Large and Dfa Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Small 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 Large are associated (or correlated) with Dfa -. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Small has no effect on the direction of Dfa - i.e., Dfa - and Dfa - go up and down completely randomly.

Pair Corralation between Dfa - and Dfa -

Assuming the 90 days horizon Dfa - is expected to generate 3.6 times less return on investment than Dfa -. But when comparing it to its historical volatility, Dfa Large is 1.79 times less risky than Dfa -. It trades about 0.04 of its potential returns per unit of risk. Dfa Small is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,950  in Dfa Small on August 17, 2024 and sell it today you would earn a total of  61.00  from holding Dfa Small or generate 2.07% return on investment over 90 days.

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

Dfa Large  vs.  Dfa Small

Dfa Large

Risk-Adjusted Performance

9 of 100

Good

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

Dfa Small

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Small are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Dfa - may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Dfa - and Dfa -

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

The idea behind Dfa Large and Dfa Small 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.