Correlation Between Dfa Municipal and Dimensional 2045

Can any of the company-specific risk be diversified away by investing in both Dfa Municipal and Dimensional 2045 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 Dimensional 2045 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 Dimensional 2045 Target, you can compare the effects of market volatilities on Dfa Municipal and Dimensional 2045 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 Dimensional 2045. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa Municipal and Dimensional 2045.

Diversification Opportunities for Dfa Municipal and Dimensional 2045

0.7

Correlation Coefficient

Dfa Municipal  Dimensional 2045

Poor diversification

The 3 months correlation between Dfa and Dimensional is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Municipal Real and Dimensional 2045 Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional 2045 Target 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 Dimensional 2045. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional 2045 Target has no effect on the direction of Dfa Municipal i.e., Dfa Municipal and Dimensional 2045 go up and down completely randomly.

Pair Corralation between Dfa Municipal and Dimensional 2045

Assuming the 90 days horizon Dfa Municipal Real is expected to generate 0.26 times more return on investment than Dimensional 2045. However, Dfa Municipal Real is 3.91 times less risky than Dimensional 2045. It trades about -0.02 of its potential returns per unit of risk. Dimensional 2045 Target is currently generating about -0.04 per unit of risk. If you would invest  1,083  in Dfa Municipal Real on December 2, 2024 and sell it today you would lose (2.00) from holding Dfa Municipal Real or give up 0.18% of portfolio value over 90 days.

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

Dfa Municipal Real  vs.  Dimensional 2045 Target

Dfa Municipal Real

Risk-Adjusted Performance

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.

Dimensional 2045 Target

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dimensional 2045 Target has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Dimensional 2045 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 Dimensional 2045

The main advantage of trading using opposite Dfa Municipal and Dimensional 2045 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dfa Municipal position performs unexpectedly, Dimensional 2045 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 Dimensional 2045 will offset losses from the drop in Dimensional 2045's long position.

The idea behind Dfa Municipal Real and Dimensional 2045 Target 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.