Correlation Between Dfa Municipal and Dfa Inflation
Can any of the company-specific risk be diversified away by investing in both Dfa Municipal and Dfa Inflation 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 Inflation 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 Inflation Protected, you can compare the effects of market volatilities on Dfa Municipal and Dfa Inflation 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 Inflation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa Municipal and Dfa Inflation.
Diversification Opportunities for Dfa Municipal and Dfa Inflation
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dfa and Dfa is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Municipal Real and Dfa Inflation Protected in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Inflation Protected 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 Inflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Inflation Protected has no effect on the direction of Dfa Municipal i.e., Dfa Municipal and Dfa Inflation go up and down completely randomly.
Pair Corralation between Dfa Municipal and Dfa Inflation
Assuming the 90 days horizon Dfa Municipal is expected to generate 1.72 times less return on investment than Dfa Inflation. But when comparing it to its historical volatility, Dfa Municipal Real is 4.84 times less risky than Dfa Inflation. It trades about 0.23 of its potential returns per unit of risk. Dfa Inflation Protected is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,023 in Dfa Inflation Protected on September 1, 2024 and sell it today you would earn a total of 74.00 from holding Dfa Inflation Protected or generate 7.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dfa Municipal Real vs. Dfa Inflation Protected
Performance |
| Timeline |
| Dfa Municipal Real |
| Dfa Inflation Protected |
Dfa Municipal and Dfa Inflation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dfa Municipal and Dfa Inflation
The main advantage of trading using opposite Dfa Municipal and Dfa Inflation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dfa Municipal position performs unexpectedly, Dfa Inflation 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 Inflation will offset losses from the drop in Dfa Inflation's long position.| Dfa Municipal vs. Mesirow Financial Small | Dfa Municipal vs. Goldman Sachs Financial | Dfa Municipal vs. John Hancock Financial | Dfa Municipal vs. Gabelli Global Financial |
| Dfa Inflation vs. International E Equity | Dfa Inflation vs. Dfa Real Estate | Dfa Inflation vs. Emerging Markets E | Dfa Inflation vs. Dfa Five Year Global |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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