Correlation Between Dfa Short-term and Us Lg

Can any of the company-specific risk be diversified away by investing in both Dfa Short-term and Us Lg 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 Short-term and Us Lg into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dfa Short Term Government and Us Lg Cap, you can compare the effects of market volatilities on Dfa Short-term and Us Lg 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 Short-term with a short position of Us Lg. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa Short-term and Us Lg.

Diversification Opportunities for Dfa Short-term and Us Lg

0.93

Correlation Coefficient

Dfa Short-term  Us Lg

Almost no diversification

The 3 months correlation between Dfa and DUSQX is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Short Term Government and Us Lg Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Lg Cap and Dfa Short-term 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 Short Term Government are associated (or correlated) with Us Lg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Lg Cap has no effect on the direction of Dfa Short-term i.e., Dfa Short-term and Us Lg go up and down completely randomly.

Pair Corralation between Dfa Short-term and Us Lg

Assuming the 90 days horizon Dfa Short-term is expected to generate 4.56 times less return on investment than Us Lg. But when comparing it to its historical volatility, Dfa Short Term Government is 16.53 times less risky than Us Lg. It trades about 0.4 of its potential returns per unit of risk. Us Lg Cap is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,190  in Us Lg Cap on September 3, 2024 and sell it today you would earn a total of  1,171  from holding Us Lg Cap or generate 53.47% return on investment over 90 days.

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

Dfa Short Term Government  vs.  Us Lg Cap

Dfa Short Term

Risk-Adjusted Performance

37 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Short Term Government are ranked lower than 37 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Dfa Short-term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Us Lg Cap

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Us Lg Cap are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Us Lg may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dfa Short-term and Us Lg

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

The idea behind Dfa Short Term Government and Us Lg Cap 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.

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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.