Correlation Between Dfa Five-year and Sparta Capital

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

By analyzing existing cross correlation between Dfa Five Year Global and Sparta Capital, you can compare the effects of market volatilities on Dfa Five-year and Sparta Capital 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 Five-year with a short position of Sparta Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa Five-year and Sparta Capital.

Diversification Opportunities for Dfa Five-year and Sparta Capital

-0.44

Correlation Coefficient

Dfa Five-year  Sparta Capital

Very good diversification

The 3 months correlation between Dfa and Sparta is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Five Year Global and Sparta Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparta Capital and Dfa Five-year 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 Five Year Global are associated (or correlated) with Sparta Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparta Capital has no effect on the direction of Dfa Five-year i.e., Dfa Five-year and Sparta Capital go up and down completely randomly.

Pair Corralation between Dfa Five-year and Sparta Capital

Assuming the 90 days horizon Dfa Five-year is expected to generate 9.37 times less return on investment than Sparta Capital. But when comparing it to its historical volatility, Dfa Five Year Global is 477.95 times less risky than Sparta Capital. It trades about 0.46 of its potential returns per unit of risk. Sparta Capital is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1.03  in Sparta Capital on December 28, 2024 and sell it today you would lose (0.92) from holding Sparta Capital or give up 89.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Dfa Five Year Global  vs.  Sparta Capital

Dfa Five Year

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Five Year Global are ranked lower than 36 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Dfa Five-year is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sparta Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sparta Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, Sparta Capital may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Dfa Five-year and Sparta Capital

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

The idea behind Dfa Five Year Global and Sparta Capital 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.