Correlation Between Dfa Targeted and Dfa California

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

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

Diversification Opportunities for Dfa Targeted and Dfa California

0.95

Correlation Coefficient

Dfa Targeted  Dfa California

Almost no diversification

The 3 months correlation between Dfa and Dfa is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Targeted Credit and Dfa California Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa California Municipal and Dfa Targeted 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 Targeted Credit are associated (or correlated) with Dfa California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa California Municipal has no effect on the direction of Dfa Targeted i.e., Dfa Targeted and Dfa California go up and down completely randomly.

Pair Corralation between Dfa Targeted and Dfa California

Assuming the 90 days horizon Dfa Targeted Credit is expected to generate 1.16 times more return on investment than Dfa California. However, Dfa Targeted is 1.16 times more volatile than Dfa California Municipal. It trades about 0.51 of its potential returns per unit of risk. Dfa California Municipal is currently generating about 0.37 per unit of risk. If you would invest  940.00  in Dfa Targeted Credit on July 8, 2024 and sell it today you would earn a total of  17.00  from holding Dfa Targeted Credit or generate 1.81% return on investment over 90 days.

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

Dfa Targeted Credit  vs.  Dfa California Municipal

Dfa Targeted Credit

Risk-Adjusted Performance

40 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Targeted Credit are ranked lower than 40 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Dfa Targeted is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dfa California Municipal

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa California Municipal are ranked lower than 29 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Dfa California 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 Targeted and Dfa California

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

The idea behind Dfa Targeted Credit and Dfa California 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.