Correlation Between Vanguard Small-cap and Dfa International
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap 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 Vanguard Small-cap and Dfa International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Small Cap Value and Dfa International Real, you can compare the effects of market volatilities on Vanguard Small-cap 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 Vanguard Small-cap with a short position of Dfa International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Dfa International.
Diversification Opportunities for Vanguard Small-cap and Dfa International
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Dfa is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Dfa International Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa International Real and Vanguard Small-cap 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 Vanguard Small Cap Value 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 Real has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Dfa International go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and Dfa International
Assuming the 90 days horizon Vanguard Small Cap Value is expected to generate 1.68 times more return on investment than Dfa International. However, Vanguard Small-cap is 1.68 times more volatile than Dfa International Real. It trades about 0.08 of its potential returns per unit of risk. Dfa International Real is currently generating about 0.1 per unit of risk. If you would invest 4,837 in Vanguard Small Cap Value on June 3, 2025 and sell it today you would earn a total of 168.00 from holding Vanguard Small Cap Value or generate 3.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Value vs. Dfa International Real
Performance |
| Timeline |
| Vanguard Small Cap |
| Dfa International Real |
Vanguard Small-cap and Dfa International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and Dfa International
The main advantage of trading using opposite Vanguard Small-cap and Dfa International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap 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.| Vanguard Small-cap vs. Strategic Advisers Income | Vanguard Small-cap vs. American Century High | Vanguard Small-cap vs. City National Rochdale | Vanguard Small-cap vs. Dunham High Yield |
| Dfa International vs. International E Equity | Dfa International vs. Emerging Markets E | Dfa International vs. Us E Equity | Dfa International vs. Dfa International Small |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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