Correlation Between Barclays ETN and Dimensional ETF

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Can any of the company-specific risk be diversified away by investing in both Barclays ETN and Dimensional ETF 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 Barclays ETN and Dimensional ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barclays ETN Select and Dimensional ETF Trust, you can compare the effects of market volatilities on Barclays ETN and Dimensional ETF 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 Barclays ETN with a short position of Dimensional ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barclays ETN and Dimensional ETF.

Diversification Opportunities for Barclays ETN and Dimensional ETF

-0.73
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Barclays and Dimensional is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Barclays ETN Select and Dimensional ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional ETF Trust and Barclays ETN 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 Barclays ETN Select are associated (or correlated) with Dimensional ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional ETF Trust has no effect on the direction of Barclays ETN i.e., Barclays ETN and Dimensional ETF go up and down completely randomly.

Pair Corralation between Barclays ETN and Dimensional ETF

Given the investment horizon of 90 days Barclays ETN Select is expected to generate 2.3 times more return on investment than Dimensional ETF. However, Barclays ETN is 2.3 times more volatile than Dimensional ETF Trust. It trades about 0.18 of its potential returns per unit of risk. Dimensional ETF Trust is currently generating about 0.04 per unit of risk. If you would invest  1,691  in Barclays ETN Select on August 26, 2024 and sell it today you would earn a total of  1,307  from holding Barclays ETN Select or generate 77.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Barclays ETN Select  vs.  Dimensional ETF Trust

 Performance 
       Timeline  
Barclays ETN Select 

Risk-Adjusted Performance

21 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Barclays ETN Select are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Barclays ETN reported solid returns over the last few months and may actually be approaching a breakup point.
Dimensional ETF Trust 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Dimensional ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Dimensional ETF is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Barclays ETN and Dimensional ETF Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Barclays ETN and Dimensional ETF

The main advantage of trading using opposite Barclays ETN and Dimensional ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barclays ETN position performs unexpectedly, Dimensional ETF 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 ETF will offset losses from the drop in Dimensional ETF's long position.
The idea behind Barclays ETN Select and Dimensional ETF Trust 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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