Correlation Between Dfa California and Dimensional 2040
Can any of the company-specific risk be diversified away by investing in both Dfa California and Dimensional 2040 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 California and Dimensional 2040 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dfa California Municipal and Dimensional 2040 Target, you can compare the effects of market volatilities on Dfa California and Dimensional 2040 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 California with a short position of Dimensional 2040. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa California and Dimensional 2040.
Diversification Opportunities for Dfa California and Dimensional 2040
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dfa and Dimensional is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Dfa California Municipal and Dimensional 2040 Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional 2040 Target and Dfa California 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 California Municipal are associated (or correlated) with Dimensional 2040. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional 2040 Target has no effect on the direction of Dfa California i.e., Dfa California and Dimensional 2040 go up and down completely randomly.
Pair Corralation between Dfa California and Dimensional 2040
Assuming the 90 days horizon Dfa California is expected to generate 5.18 times less return on investment than Dimensional 2040. But when comparing it to its historical volatility, Dfa California Municipal is 7.6 times less risky than Dimensional 2040. It trades about 0.37 of its potential returns per unit of risk. Dimensional 2040 Target is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 1,586 in Dimensional 2040 Target on May 28, 2025 and sell it today you would earn a total of 108.00 from holding Dimensional 2040 Target or generate 6.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 98.41% |
| Values | Daily Returns |
Dfa California Municipal vs. Dimensional 2040 Target
Performance |
| Timeline |
| Dfa California Municipal |
| Dimensional 2040 Target |
Dfa California and Dimensional 2040 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dfa California and Dimensional 2040
The main advantage of trading using opposite Dfa California and Dimensional 2040 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dfa California position performs unexpectedly, Dimensional 2040 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 Dimensional 2040 will offset losses from the drop in Dimensional 2040's long position.| Dfa California vs. Multisector Bond Sma | Dfa California vs. Doubleline Low Duration | Dfa California vs. Scout E Bond | Dfa California vs. Gmo E Plus |
| Dimensional 2040 vs. Dimensional 2035 Target | Dimensional 2040 vs. Dimensional 2025 Target | Dimensional 2040 vs. Dimensional 2030 Target | Dimensional 2040 vs. Dimensional 2050 Target |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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