Correlation Between Dfa Ny and World Core

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

By analyzing existing cross correlation between Dfa Ny Municipal and World Core Equity, you can compare the effects of market volatilities on Dfa Ny and World Core 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 Ny with a short position of World Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa Ny and World Core.

Diversification Opportunities for Dfa Ny and World Core

0.6

Correlation Coefficient

Dfa Ny  World Core

Poor diversification

The 3 months correlation between Dfa and World is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Dfa Ny Municipal and World Core Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Core Equity and Dfa Ny 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 Ny Municipal are associated (or correlated) with World Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Core Equity has no effect on the direction of Dfa Ny i.e., Dfa Ny and World Core go up and down completely randomly.

Pair Corralation between Dfa Ny and World Core

Assuming the 90 days horizon Dfa Ny is expected to generate 7.28 times less return on investment than World Core. But when comparing it to its historical volatility, Dfa Ny Municipal is 16.67 times less risky than World Core. It trades about 0.12 of its potential returns per unit of risk. World Core Equity is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,890  in World Core Equity on February 21, 2024 and sell it today you would earn a total of  495.00  from holding World Core Equity or generate 26.19% return on investment over 90 days.

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

Dfa Ny Municipal  vs.  World Core Equity

Dfa Ny Municipal

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Ny Municipal are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Dfa Ny is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

World Core Equity

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in World Core Equity are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, World Core may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Dfa Ny and World Core

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

The idea behind Dfa Ny Municipal and World Core Equity 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.