Correlation Between Vanguard Small-cap and Dfa Mn

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

By analyzing existing cross correlation between Vanguard Small Cap Value and Dfa Mn Municipal, you can compare the effects of market volatilities on Vanguard Small-cap and Dfa Mn 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 Vanguard Small-cap with a short position of Dfa Mn. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Dfa Mn.

Diversification Opportunities for Vanguard Small-cap and Dfa Mn

-0.39

Correlation Coefficient

Vanguard Small-cap  Dfa Mn

Very good diversification

The 3 months correlation between Vanguard and Dfa is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Dfa Mn Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Mn Municipal and Vanguard Small-cap 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 Vanguard Small Cap Value are associated (or correlated) with Dfa Mn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Mn Municipal has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Dfa Mn go up and down completely randomly.

Pair Corralation between Vanguard Small-cap and Dfa Mn

Assuming the 90 days horizon Vanguard Small Cap Value is expected to under-perform the Dfa Mn. In addition to that, Vanguard Small-cap is 20.92 times more volatile than Dfa Mn Municipal. It trades about -0.09 of its total potential returns per unit of risk. Dfa Mn Municipal is currently generating about 0.29 per unit of volatility. If you would invest  978.00  in Dfa Mn Municipal on December 21, 2024 and sell it today you would earn a total of  8.00  from holding Dfa Mn Municipal or generate 0.82% return on investment over 90 days.

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

Vanguard Small Cap Value  vs.  Dfa Mn Municipal

Vanguard Small Cap

Risk-Adjusted Performance

Very Weak

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

Dfa Mn Municipal

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Mn Municipal are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Dfa Mn is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Small-cap and Dfa Mn

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

The idea behind Vanguard Small Cap Value and Dfa Mn Municipal 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.