Correlation Between High-yield Municipal and Dimensional ETF
Can any of the company-specific risk be diversified away by investing in both High-yield Municipal and Dimensional ETF 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 High-yield Municipal and Dimensional ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between High Yield Municipal Fund and Dimensional ETF Trust, you can compare the effects of market volatilities on High-yield Municipal and Dimensional ETF 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 High-yield Municipal with a short position of Dimensional ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of High-yield Municipal and Dimensional ETF.
Diversification Opportunities for High-yield Municipal and Dimensional ETF
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between High-yield and Dimensional is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Municipal Fund and Dimensional ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional ETF Trust and High-yield 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 High Yield Municipal Fund are associated (or correlated) with Dimensional ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional ETF Trust has no effect on the direction of High-yield Municipal i.e., High-yield Municipal and Dimensional ETF go up and down completely randomly.
Pair Corralation between High-yield Municipal and Dimensional ETF
Assuming the 90 days horizon High-yield Municipal is expected to generate 1.9 times less return on investment than Dimensional ETF. But when comparing it to its historical volatility, High Yield Municipal Fund is 3.12 times less risky than Dimensional ETF. It trades about 0.08 of its potential returns per unit of risk. Dimensional ETF Trust is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,324 in Dimensional ETF Trust on August 28, 2024 and sell it today you would earn a total of 377.00 from holding Dimensional ETF Trust or generate 16.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.72% |
| Values | Daily Returns |
High Yield Municipal Fund vs. Dimensional ETF Trust
Performance |
| Timeline |
| High Yield Municipal |
| Dimensional ETF Trust |
High-yield Municipal and Dimensional ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with High-yield Municipal and Dimensional ETF
The main advantage of trading using opposite High-yield Municipal and Dimensional ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High-yield Municipal position performs unexpectedly, Dimensional ETF 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 ETF will offset losses from the drop in Dimensional ETF's long position.| High-yield Municipal vs. High Yield Fund Investor | High-yield Municipal vs. Intermediate Term Tax Free Bond | High-yield Municipal vs. California High Yield Municipal | High-yield Municipal vs. T Rowe Price |
| Dimensional ETF vs. Invesco PureBeta MSCI | Dimensional ETF vs. Aquagold International | Dimensional ETF vs. Morningstar Unconstrained Allocation | Dimensional ETF vs. High Yield Municipal Fund |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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