Correlation Between World Core and Dfa International
Can any of the company-specific risk be diversified away by investing in both World Core and Dfa 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 World Core and Dfa International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between World Core Equity and Dfa International Small, you can compare the effects of market volatilities on World Core and Dfa 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 World Core with a short position of Dfa International. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Core and Dfa International.
Diversification Opportunities for World Core and Dfa International
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between World and Dfa is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding World Core Equity and Dfa International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa International Small and World Core 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 World Core Equity are associated (or correlated) with Dfa International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa International Small has no effect on the direction of World Core i.e., World Core and Dfa International go up and down completely randomly.
Pair Corralation between World Core and Dfa International
Assuming the 90 days horizon World Core is expected to generate 3.45 times less return on investment than Dfa International. But when comparing it to its historical volatility, World Core Equity is 1.04 times less risky than Dfa International. It trades about 0.03 of its potential returns per unit of risk. Dfa International Small is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,960 in Dfa International Small on September 25, 2025 and sell it today you would earn a total of 148.00 from holding Dfa International Small or generate 5.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
World Core Equity vs. Dfa International Small
Performance |
| Timeline |
| World Core Equity |
| Dfa International Small |
World Core and Dfa International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with World Core and Dfa International
The main advantage of trading using opposite World Core and Dfa International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Core position performs unexpectedly, Dfa 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 Dfa International will offset losses from the drop in Dfa International's long position.| World Core vs. Intal High Relative | World Core vs. Dfa International | World Core vs. Dfa Inflation Protected | World Core vs. Dfa International Small |
| Dfa International vs. Intal High Relative | Dfa International vs. Dfa International | Dfa International vs. Dfa Inflation Protected | Dfa International vs. Dfa International |
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.
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