Correlation Between Dfa Municipal and Us Core

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

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

Diversification Opportunities for Dfa Municipal and Us Core

-0.44

Correlation Coefficient

Dfa Municipal  Us Core

Very good diversification

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

Pair Corralation between Dfa Municipal and Us Core

Assuming the 90 days horizon Dfa Municipal Real is expected to generate 0.05 times more return on investment than Us Core. However, Dfa Municipal Real is 18.8 times less risky than Us Core. It trades about 0.41 of its potential returns per unit of risk. Us E Equity is currently generating about -0.05 per unit of risk. If you would invest  1,068  in Dfa Municipal Real on December 28, 2024 and sell it today you would earn a total of  14.00  from holding Dfa Municipal Real or generate 1.31% return on investment over 90 days.

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

Dfa Municipal Real  vs.  Us E Equity

Dfa Municipal Real

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Municipal Real are ranked lower than 32 (%) of all funds and portfolios of funds over the last 90 days. 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.

Us E Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Us E Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Us Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dfa Municipal and Us Core

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

The idea behind Dfa Municipal Real and Us E Equity 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.