Correlation Between Oklahoma Municipal and Virtus Dfa

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

By analyzing existing cross correlation between Oklahoma Municipal Fund and Virtus Dfa 2040, you can compare the effects of market volatilities on Oklahoma Municipal and Virtus Dfa 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 Oklahoma Municipal with a short position of Virtus Dfa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oklahoma Municipal and Virtus Dfa.

Diversification Opportunities for Oklahoma Municipal and Virtus Dfa

0.64

Correlation Coefficient

Oklahoma Municipal  Virtus Dfa

Poor diversification

The 3 months correlation between Oklahoma and Virtus is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Oklahoma Municipal Fund and Virtus Dfa 2040 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Dfa 2040 and Oklahoma 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 Oklahoma Municipal Fund are associated (or correlated) with Virtus Dfa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Dfa 2040 has no effect on the direction of Oklahoma Municipal i.e., Oklahoma Municipal and Virtus Dfa go up and down completely randomly.

Pair Corralation between Oklahoma Municipal and Virtus Dfa

Assuming the 90 days horizon Oklahoma Municipal Fund is expected to generate 0.11 times more return on investment than Virtus Dfa. However, Oklahoma Municipal Fund is 9.13 times less risky than Virtus Dfa. It trades about -0.34 of its potential returns per unit of risk. Virtus Dfa 2040 is currently generating about -0.29 per unit of risk. If you would invest  1,068  in Oklahoma Municipal Fund on October 8, 2024 and sell it today you would lose (20.00) from holding Oklahoma Municipal Fund or give up 1.87% of portfolio value over 90 days.

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

Oklahoma Municipal Fund  vs.  Virtus Dfa 2040

Oklahoma Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Virtus Dfa 2040

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virtus Dfa 2040 has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Oklahoma Municipal and Virtus Dfa

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

The idea behind Oklahoma Municipal Fund and Virtus Dfa 2040 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.