Correlation Between Dfa Small and Dfa -

Can any of the company-specific risk be diversified away by investing in both Dfa Small 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 Small and Dfa - 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 Large, you can compare the effects of market volatilities on Dfa Small 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 Small with a short position of Dfa -. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa Small and Dfa -.

Diversification Opportunities for Dfa Small and Dfa -

0.93

Correlation Coefficient

Dfa Small  Dfa -

Almost no diversification

The 3 months correlation between Dfa and Dfa is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Small and Dfa Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Large and Dfa Small 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 -. 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 Small i.e., Dfa Small and Dfa - go up and down completely randomly.

Pair Corralation between Dfa Small and Dfa -

Assuming the 90 days horizon Dfa Small is expected to generate 1.15 times less return on investment than Dfa -. In addition to that, Dfa Small is 1.37 times more volatile than Dfa Large. It trades about 0.07 of its total potential returns per unit of risk. Dfa Large is currently generating about 0.11 per unit of volatility. If you would invest  2,593  in Dfa Large on September 3, 2024 and sell it today you would earn a total of  1,410  from holding Dfa Large or generate 54.38% return on investment over 90 days.

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

Dfa Small  vs.  Dfa Large

Dfa Small

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Small are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Dfa Small showed solid returns over the last few months and may actually be approaching a breakup point.

Dfa Large

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Large are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Dfa - may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dfa Small and Dfa -

The main advantage of trading using opposite Dfa Small and Dfa - positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dfa Small 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 Small 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.

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 Correlations module to find global opportunities by holding instruments from different markets.