Correlation Between Dfa Selective and Dfa One-year

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

By analyzing existing cross correlation between Dfa Selective State and Dfa One Year Fixed, you can compare the effects of market volatilities on Dfa Selective and Dfa One-year 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 Selective with a short position of Dfa One-year. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa Selective and Dfa One-year.

Diversification Opportunities for Dfa Selective and Dfa One-year

0.88

Correlation Coefficient

Dfa Selective  Dfa One-year

Very poor diversification

The 3 months correlation between Dfa and Dfa is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Selective State and Dfa One Year Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa One Year and Dfa Selective 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 Selective State are associated (or correlated) with Dfa One-year. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa One Year has no effect on the direction of Dfa Selective i.e., Dfa Selective and Dfa One-year go up and down completely randomly.

Pair Corralation between Dfa Selective and Dfa One-year

Assuming the 90 days horizon Dfa Selective is expected to generate 1.08 times less return on investment than Dfa One-year. In addition to that, Dfa Selective is 1.17 times more volatile than Dfa One Year Fixed. It trades about 0.12 of its total potential returns per unit of risk. Dfa One Year Fixed is currently generating about 0.15 per unit of volatility. If you would invest  1,018  in Dfa One Year Fixed on May 3, 2025 and sell it today you would earn a total of  6.00  from holding Dfa One Year Fixed or generate 0.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Dfa Selective State  vs.  Dfa One Year Fixed

Dfa Selective State

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Selective State 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 Selective is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dfa One Year

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa One Year Fixed are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Dfa One-year 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 Selective and Dfa One-year

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

The idea behind Dfa Selective State and Dfa One Year Fixed 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.