Correlation Between Dfa Mn and Us Small

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

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

Diversification Opportunities for Dfa Mn and Us Small

0.93

Correlation Coefficient

Dfa Mn  Us Small

Almost no diversification

The 3 months correlation between Dfa and DFSVX is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Mn Municipal and Us Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Small Cap and Dfa Mn 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 Mn Municipal are associated (or correlated) with Us Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Small Cap has no effect on the direction of Dfa Mn i.e., Dfa Mn and Us Small go up and down completely randomly.

Pair Corralation between Dfa Mn and Us Small

Assuming the 90 days horizon Dfa Mn is expected to generate 11.58 times less return on investment than Us Small. But when comparing it to its historical volatility, Dfa Mn Municipal is 30.54 times less risky than Us Small. It trades about 0.49 of its potential returns per unit of risk. Us Small Cap is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  4,212  in Us Small Cap on May 1, 2025 and sell it today you would earn a total of  616.00  from holding Us Small Cap or generate 14.62% return on investment over 90 days.

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

Dfa Mn Municipal  vs.  Us Small Cap

Dfa Mn Municipal

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Mn Municipal are ranked lower than 38 (%) 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.

Us Small Cap

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Us Small Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Us Small showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dfa Mn and Us Small

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

The idea behind Dfa Mn Municipal and Us Small 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 AI Portfolio Prophet module to use AI to generate optimal portfolios and find profitable investment opportunities.