Correlation Between Dfa Ny and Us Lg

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

Diversification Opportunities for Dfa Ny and Us Lg

0.33

Correlation Coefficient

Dfa Ny  Us Lg

Weak diversification

The 3 months correlation between Dfa and DUSQX is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Ny Municipal and Us Lg Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Lg Cap 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 Lg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Lg Cap has no effect on the direction of Dfa Ny i.e., Dfa Ny and Us Lg go up and down completely randomly.

Pair Corralation between Dfa Ny and Us Lg

Assuming the 90 days horizon Dfa Ny is expected to generate 7.47 times less return on investment than Us Lg. But when comparing it to its historical volatility, Dfa Ny Municipal is 15.7 times less risky than Us Lg. It trades about 0.23 of its potential returns per unit of risk. Us Lg Cap is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,186  in Us Lg Cap on December 4, 2024 and sell it today you would earn a total of  1,104  from holding Us Lg Cap or generate 50.5% return on investment over 90 days.

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

Dfa Ny Municipal  vs.  Us Lg Cap

Dfa Ny Municipal

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Ny Municipal are ranked lower than 13 (%) 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 Lg Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Us Lg Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Us Lg 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 Ny and Us Lg

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

The idea behind Dfa Ny Municipal and Us Lg Cap 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.