Correlation Between Dfa Social and World Ex

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

By analyzing existing cross correlation between Dfa Social Fixed and World Ex Core, you can compare the effects of market volatilities on Dfa Social and World Ex 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 Social with a short position of World Ex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa Social and World Ex.

Diversification Opportunities for Dfa Social and World Ex

0.63

Correlation Coefficient

Dfa Social  World Ex

Poor diversification

The 3 months correlation between Dfa and World is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Social Fixed and World Ex Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Ex Core and Dfa Social 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 Social Fixed are associated (or correlated) with World Ex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Ex Core has no effect on the direction of Dfa Social i.e., Dfa Social and World Ex go up and down completely randomly.

Pair Corralation between Dfa Social and World Ex

Assuming the 90 days horizon Dfa Social Fixed is expected to generate 0.51 times more return on investment than World Ex. However, Dfa Social Fixed is 1.95 times less risky than World Ex. It trades about -0.08 of its potential returns per unit of risk. World Ex Core is currently generating about -0.12 per unit of risk. If you would invest  919.00  in Dfa Social Fixed on September 13, 2024 and sell it today you would lose (11.00) from holding Dfa Social Fixed or give up 1.2% of portfolio value over 90 days.

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

Dfa Social Fixed  vs.  World Ex Core

Dfa Social Fixed

Risk-Adjusted Performance

0 of 100

Very Weak

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

World Ex Core

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days World Ex Core has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, World Ex 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 Social and World Ex

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

The idea behind Dfa Social Fixed and World Ex Core 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..