Correlation Between ARACX and Dimensional International
Can any of the company-specific risk be diversified away by investing in both ARACX and Dimensional International 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 ARACX and Dimensional International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ARACX and Dimensional International Value, you can compare the effects of market volatilities on ARACX and Dimensional International 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 ARACX with a short position of Dimensional International. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARACX and Dimensional International.
Diversification Opportunities for ARACX and Dimensional International
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between ARACX and Dimensional is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding ARACX and Dimensional International Valu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional International and ARACX 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 ARACX are associated (or correlated) with Dimensional International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional International has no effect on the direction of ARACX i.e., ARACX and Dimensional International go up and down completely randomly.
Pair Corralation between ARACX and Dimensional International
Assuming the 90 days horizon ARACX is expected to generate 15.0 times less return on investment than Dimensional International. But when comparing it to its historical volatility, ARACX is 17.46 times less risky than Dimensional International. It trades about 0.49 of its potential returns per unit of risk. Dimensional International Value is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest 3,536 in Dimensional International Value on November 2, 2024 and sell it today you would earn a total of 219.00 from holding Dimensional International Value or generate 6.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ARACX vs. Dimensional International Valu
Performance |
| Timeline |
| ARACX |
| Dimensional International |
ARACX and Dimensional International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ARACX and Dimensional International
The main advantage of trading using opposite ARACX and Dimensional International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARACX position performs unexpectedly, Dimensional International 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 International will offset losses from the drop in Dimensional International's long position.| ARACX vs. Vanguard Total Stock | ARACX vs. SPDR SP 500 | ARACX vs. iShares Core SP | ARACX vs. Vanguard Total Bond |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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