Correlation Between Brandes International and Dfa International
Can any of the company-specific risk be diversified away by investing in both Brandes International 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 Brandes International and Dfa International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brandes International Small and Dfa International Small, you can compare the effects of market volatilities on Brandes International 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 Brandes International with a short position of Dfa International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brandes International and Dfa International.
Diversification Opportunities for Brandes International and Dfa International
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Brandes and Dfa is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Brandes International Small 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 Brandes 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 Brandes International Small 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 Brandes International i.e., Brandes International and Dfa International go up and down completely randomly.
Pair Corralation between Brandes International and Dfa International
Assuming the 90 days horizon Brandes International Small is expected to generate 0.9 times more return on investment than Dfa International. However, Brandes International Small is 1.11 times less risky than Dfa International. It trades about 0.07 of its potential returns per unit of risk. Dfa International Small is currently generating about -0.01 per unit of risk. If you would invest 1,630 in Brandes International Small on February 6, 2024 and sell it today you would earn a total of 18.00 from holding Brandes International Small or generate 1.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brandes International Small vs. Dfa International Small
Performance |
| Timeline |
| Brandes International |
| Dfa International Small |
Brandes International and Dfa International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brandes International and Dfa International
The main advantage of trading using opposite Brandes International and Dfa International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brandes International 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.| Brandes International vs. Brandes Small Cap | Brandes International vs. Brandes Small Cap | Brandes International vs. Brandes Small Cap | Brandes International vs. Brandes E Plus |
| Dfa International vs. Dfa International Value | Dfa International vs. International Small Pany | Dfa International vs. Us Large Cap | Dfa International vs. Us Small Cap |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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