Correlation Between Dfa Ny and Us Large

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

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

Diversification Opportunities for Dfa Ny and Us Large

0.85

Correlation Coefficient

Dfa Ny  Us Large

Very poor diversification

The 3 months correlation between Dfa and DFUSX is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Ny Municipal and Us Large Pany in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Large Pany and Dfa Ny 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 Ny Municipal are associated (or correlated) with Us Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Large Pany has no effect on the direction of Dfa Ny i.e., Dfa Ny and Us Large go up and down completely randomly.

Pair Corralation between Dfa Ny and Us Large

Assuming the 90 days horizon Dfa Ny is expected to generate 9.41 times less return on investment than Us Large. But when comparing it to its historical volatility, Dfa Ny Municipal is 15.65 times less risky than Us Large. It trades about 0.25 of its potential returns per unit of risk. Us Large Pany is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,982  in Us Large Pany on September 15, 2024 and sell it today you would earn a total of  1,027  from holding Us Large Pany or generate 34.44% return on investment over 90 days.

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

Dfa Ny Municipal  vs.  Us Large Pany

Dfa Ny Municipal

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Ny Municipal are ranked lower than 9 (%) 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.

Us Large Pany

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Us Large Pany are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Us Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dfa Ny and Us Large

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

The idea behind Dfa Ny Municipal and Us Large Pany 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.

Check out your portfolio center.

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.