Correlation Between Dfa Municipal and Dfa Five-year
Can any of the company-specific risk be diversified away by investing in both Dfa Municipal and Dfa Five-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 Municipal and Dfa Five-year into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dfa Municipal Real and Dfa Five Year Global, you can compare the effects of market volatilities on Dfa Municipal and Dfa Five-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 Municipal with a short position of Dfa Five-year. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa Municipal and Dfa Five-year.
Diversification Opportunities for Dfa Municipal and Dfa Five-year
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dfa and Dfa is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Municipal Real and Dfa Five Year Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Five Year and Dfa Municipal 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 Municipal Real are associated (or correlated) with Dfa Five-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 Five Year has no effect on the direction of Dfa Municipal i.e., Dfa Municipal and Dfa Five-year go up and down completely randomly.
Pair Corralation between Dfa Municipal and Dfa Five-year
Assuming the 90 days horizon Dfa Municipal is expected to generate 2.58 times less return on investment than Dfa Five-year. But when comparing it to its historical volatility, Dfa Municipal Real is 1.22 times less risky than Dfa Five-year. It trades about 0.14 of its potential returns per unit of risk. Dfa Five Year Global is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 1,004 in Dfa Five Year Global on July 21, 2025 and sell it today you would earn a total of 12.00 from holding Dfa Five Year Global or generate 1.2% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Dfa Municipal Real vs. Dfa Five Year Global
Performance |
Timeline |
Dfa Municipal Real |
Dfa Five Year |
Dfa Municipal and Dfa Five-year Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Dfa Municipal and Dfa Five-year
The main advantage of trading using opposite Dfa Municipal and Dfa Five-year positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dfa Municipal position performs unexpectedly, Dfa Five-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 Five-year will offset losses from the drop in Dfa Five-year's long position.Dfa Municipal vs. Fidelity Capital Income | Dfa Municipal vs. Jpmorgan High Yield | Dfa Municipal vs. Nuveen High Yield | Dfa Municipal vs. Tax Exempt High Yield |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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