Correlation Between Dfa Targeted and Financial Industries

Can any of the company-specific risk be diversified away by investing in both Dfa Targeted and Financial Industries 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 Financial Industries 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 Financial Industries Fund, you can compare the effects of market volatilities on Dfa Targeted and Financial Industries 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 Financial Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa Targeted and Financial Industries.

Diversification Opportunities for Dfa Targeted and Financial Industries

0.49

Correlation Coefficient

Dfa Targeted  Financial Industries

Very weak diversification

The 3 months correlation between Dfa and Financial is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Targeted Credit and Financial Industries Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Industries 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 Financial Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Industries has no effect on the direction of Dfa Targeted i.e., Dfa Targeted and Financial Industries go up and down completely randomly.

Pair Corralation between Dfa Targeted and Financial Industries

Assuming the 90 days horizon Dfa Targeted Credit is expected to generate 0.08 times more return on investment than Financial Industries. However, Dfa Targeted Credit is 12.51 times less risky than Financial Industries. It trades about 0.46 of its potential returns per unit of risk. Financial Industries Fund is currently generating about 0.0 per unit of risk. If you would invest  949.00  in Dfa Targeted Credit on May 10, 2025 and sell it today you would earn a total of  18.00  from holding Dfa Targeted Credit or generate 1.9% return on investment over 90 days.

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

Dfa Targeted Credit  vs.  Financial Industries Fund

Dfa Targeted Credit

Risk-Adjusted Performance

High

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Targeted Credit are ranked lower than 35 (%) 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.

Financial Industries

Risk-Adjusted Performance

Weakest

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

Pair Trading with Dfa Targeted and Financial Industries

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

The idea behind Dfa Targeted Credit and Financial Industries Fund 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.