Correlation Between Dimensional ETF and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Dimensional ETF and Dow Jones 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 Dimensional ETF and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dimensional ETF Trust and Dow Jones Industrial, you can compare the effects of market volatilities on Dimensional ETF and Dow Jones 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 Dimensional ETF with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional ETF and Dow Jones.
Diversification Opportunities for Dimensional ETF and Dow Jones
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dimensional and Dow is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional ETF Trust and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Dimensional ETF 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 Dimensional ETF Trust are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Dimensional ETF i.e., Dimensional ETF and Dow Jones go up and down completely randomly.
Pair Corralation between Dimensional ETF and Dow Jones
Given the investment horizon of 90 days Dimensional ETF is expected to generate 1.41 times less return on investment than Dow Jones. In addition to that, Dimensional ETF is 1.11 times more volatile than Dow Jones Industrial. It trades about 0.13 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.2 per unit of volatility. If you would invest 4,348,783 in Dow Jones Industrial on November 18, 2024 and sell it today you would earn a total of 105,825 from holding Dow Jones Industrial or generate 2.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional ETF Trust vs. Dow Jones Industrial
Performance |
| Timeline |
Dimensional ETF and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Dimensional ETF Trust
Pair trading matchups for Dimensional ETF
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Dimensional ETF and Dow Jones
The main advantage of trading using opposite Dimensional ETF and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional ETF position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Dimensional ETF vs. Freedom Day Dividend | Dimensional ETF vs. Davis Select International | Dimensional ETF vs. iShares MSCI China | Dimensional ETF vs. SmartETFs Dividend Builder |
| Dow Jones vs. Palomar Holdings | Dow Jones vs. Mesa Air Group | Dow Jones vs. LATAM Airlines Group | Dow Jones vs. Unum Group |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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