Correlation Between DFA INTERNATIONAL and Disney

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

By analyzing existing cross correlation between DFA INTERNATIONAL SMALL and Walt Disney, you can compare the effects of market volatilities on DFA INTERNATIONAL and Disney 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 INTERNATIONAL with a short position of Disney. Check out your portfolio center. Please also check ongoing floating volatility patterns of DFA INTERNATIONAL and Disney.

Diversification Opportunities for DFA INTERNATIONAL and Disney

0.87

Correlation Coefficient

DFA INTERNATIONAL Disney

Very poor diversification

The 3 months correlation between DISVX and Disney is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding DFA INTERNATIONAL SMALL and Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney and DFA 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 DFA INTERNATIONAL SMALL are associated (or correlated) with Disney. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walt Disney has no effect on the direction of DFA INTERNATIONAL i.e., DFA INTERNATIONAL and Disney go up and down completely randomly.

Pair Corralation between DFA INTERNATIONAL and Disney

Assuming the 90 days horizon DFA INTERNATIONAL SMALL is expected to generate 0.59 times more return on investment than Disney. However, DFA INTERNATIONAL SMALL is 1.7 times less risky than Disney. It trades about -0.09 of its potential returns per unit of risk. Walt Disney is currently generating about -0.14 per unit of risk. If you would invest  2,017  in DFA INTERNATIONAL SMALL on December 24, 2022 and sell it today you would lose (74.00)  from holding DFA INTERNATIONAL SMALL or give up 3.67% of portfolio value over 90 days.

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

DFA INTERNATIONAL SMALL  vs.  Walt Disney

DFA INTERNATIONAL SMALL

DISVX Performance

5 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in DFA INTERNATIONAL SMALL are ranked lower than 5 (%) 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.

Walt Disney

Disney Performance

8 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting forward indicators, Disney may actually be approaching a critical reversion point that can send shares even higher in April 2023.

Pair Trading with DFA INTERNATIONAL and Disney

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

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The idea behind DFA INTERNATIONAL SMALL and Walt Disney 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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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 Piotroski F Score module to get Piotroski F Score based on binary analysis strategy of nine different fundamentals.