Correlation Between Dupont De and Dfa International

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

By analyzing existing cross correlation between Dupont De Nemours and Dfa International Small, you can compare the effects of market volatilities on Dupont De 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 Dupont De with a short position of Dfa International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dupont De and Dfa International.

Diversification Opportunities for Dupont De and Dfa International

0.82

Correlation Coefficient

Dupont De  Dfa International

Very poor diversification

The 3 months correlation between Dupont and Dfa is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours 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 Dupont De 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 Dupont De Nemours 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 Dupont De i.e., Dupont De and Dfa International go up and down completely randomly.

Pair Corralation between Dupont De and Dfa International

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to under-perform the Dfa International. In addition to that, Dupont De is 1.4 times more volatile than Dfa International Small. It trades about -0.09 of its total potential returns per unit of risk. Dfa International Small is currently generating about -0.04 per unit of volatility. If you would invest  2,219  in Dfa International Small on January 26, 2024 and sell it today you would lose (16.00) from holding Dfa International Small or give up 0.72% of portfolio value over 90 days.

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

Dupont De Nemours  vs.  Dfa International Small

Dupont De Nemours

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dupont De Nemours are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental indicators, Dupont De exhibited solid returns over the last few months and may actually be approaching a breakup point.

Dfa International Small

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa International Small are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Dfa International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dupont De and Dfa International

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

The idea behind Dupont De Nemours and Dfa International Small 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.