Correlation Between Dfa Mn and Dfa Ny

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Can any of the company-specific risk be diversified away by investing in both Dfa Mn and Dfa Ny 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 Mn and Dfa Ny into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dfa Mn Municipal and Dfa Ny Municipal, you can compare the effects of market volatilities on Dfa Mn and Dfa Ny 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 Mn with a short position of Dfa Ny. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa Mn and Dfa Ny.

Diversification Opportunities for Dfa Mn and Dfa Ny

0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between Dfa and Dfa is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Mn Municipal and Dfa Ny Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Ny Municipal and Dfa Mn 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 Mn Municipal are associated (or correlated) with Dfa Ny. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Ny Municipal has no effect on the direction of Dfa Mn i.e., Dfa Mn and Dfa Ny go up and down completely randomly.

Pair Corralation between Dfa Mn and Dfa Ny

Assuming the 90 days horizon Dfa Mn is expected to generate 1.97 times less return on investment than Dfa Ny. In addition to that, Dfa Mn is 1.11 times more volatile than Dfa Ny Municipal. It trades about 0.06 of its total potential returns per unit of risk. Dfa Ny Municipal is currently generating about 0.14 per unit of volatility. If you would invest  1,011  in Dfa Ny Municipal on September 6, 2024 and sell it today you would earn a total of  4.00  from holding Dfa Ny Municipal or generate 0.4% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Dfa Mn Municipal  vs.  Dfa Ny Municipal

 Performance 
       Timeline  
Dfa Mn Municipal 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Mn Municipal are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Dfa Mn is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Dfa Ny Municipal 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Ny Municipal are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Dfa Ny is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dfa Mn and Dfa Ny Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dfa Mn and Dfa Ny

The main advantage of trading using opposite Dfa Mn and Dfa Ny positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dfa Mn position performs unexpectedly, Dfa Ny 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 Ny will offset losses from the drop in Dfa Ny's long position.
The idea behind Dfa Mn Municipal and Dfa Ny Municipal 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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