Correlation Between YFII and DIA

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

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

Diversification Opportunities for YFII and DIA

0.75

Correlation Coefficient

YFII  DIA

Poor diversification

The 3 months correlation between YFII and DIA is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding YFII and DIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DIA and YFII 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 YFII are associated (or correlated) with DIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DIA has no effect on the direction of YFII i.e., YFII and DIA go up and down completely randomly.

Pair Corralation between YFII and DIA

Assuming the 90 days trading horizon YFII is expected to under-perform the DIA. But the crypto coin apears to be less risky and, when comparing its historical volatility, YFII is 1.07 times less risky than DIA. The crypto coin trades about -0.14 of its potential returns per unit of risk. The DIA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  42.00  in DIA on April 20, 2025 and sell it today you would earn a total of  20.00  from holding DIA or generate 47.62% return on investment over 90 days.

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

YFII  vs.  DIA

YFII

Risk-Adjusted Performance

Very Weak

Over the last 90 days YFII has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in August 2025. The latest tumult may also be a sign of longer-term up-swing for YFII shareholders.

DIA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DIA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, DIA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with YFII and DIA

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

The idea behind YFII and DIA 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.