Correlation Between Asia Pacific and Dfa Municipal

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

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

Diversification Opportunities for Asia Pacific and Dfa Municipal

0.54

Correlation Coefficient

Asia Pacific  Dfa Municipal

Very weak diversification

The 3 months correlation between Asia and Dfa is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Asia Pacific Small and Dfa Municipal Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Municipal Real and Asia Pacific 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 Asia Pacific Small are associated (or correlated) with Dfa Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Municipal Real has no effect on the direction of Asia Pacific i.e., Asia Pacific and Dfa Municipal go up and down completely randomly.

Pair Corralation between Asia Pacific and Dfa Municipal

Assuming the 90 days horizon Asia Pacific Small is expected to generate 10.51 times more return on investment than Dfa Municipal. However, Asia Pacific is 10.51 times more volatile than Dfa Municipal Real. It trades about 0.01 of its potential returns per unit of risk. Dfa Municipal Real is currently generating about 0.09 per unit of risk. If you would invest  1,624  in Asia Pacific Small on September 23, 2024 and sell it today you would earn a total of  44.00  from holding Asia Pacific Small or generate 2.71% return on investment over 90 days.

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

Asia Pacific Small  vs.  Dfa Municipal Real

Asia Pacific Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asia Pacific Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Dfa Municipal Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dfa Municipal Real has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Dfa Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Asia Pacific and Dfa Municipal

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

The idea behind Asia Pacific Small and Dfa Municipal Real 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.