Correlation Between Dfa International and Vela International

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

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

Diversification Opportunities for Dfa International and Vela International

0.95

Correlation Coefficient

Dfa International  Vela International

Almost no diversification

The 3 months correlation between Dfa and Vela is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Dfa International Small and Vela International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vela International 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 Small are associated (or correlated) with Vela International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vela International has no effect on the direction of Dfa International i.e., Dfa International and Vela International go up and down completely randomly.

Pair Corralation between Dfa International and Vela International

Assuming the 90 days horizon Dfa International Small is expected to generate 1.24 times more return on investment than Vela International. However, Dfa International is 1.24 times more volatile than Vela International. It trades about 0.06 of its potential returns per unit of risk. Vela International is currently generating about 0.07 per unit of risk. If you would invest  1,955  in Dfa International Small on September 14, 2024 and sell it today you would earn a total of  289.00  from holding Dfa International Small or generate 14.78% return on investment over 90 days.

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

Dfa International Small  vs.  Vela International

Dfa International Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dfa International Small has generated negative risk-adjusted returns adding no value to fund investors. 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.

Vela International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vela International has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vela International 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 International and Vela International

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

The idea behind Dfa International Small and Vela International 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.