Correlation Between Dimensional Core and Democratic Large
Can any of the company-specific risk be diversified away by investing in both Dimensional Core and Democratic Large 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 Core and Democratic Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dimensional Core Equity and Democratic Large Cap, you can compare the effects of market volatilities on Dimensional Core and Democratic Large 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 Core with a short position of Democratic Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and Democratic Large.
Diversification Opportunities for Dimensional Core and Democratic Large
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dimensional and Democratic is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and Democratic Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Democratic Large Cap and Dimensional Core 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 Core Equity are associated (or correlated) with Democratic Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Democratic Large Cap has no effect on the direction of Dimensional Core i.e., Dimensional Core and Democratic Large go up and down completely randomly.
Pair Corralation between Dimensional Core and Democratic Large
Given the investment horizon of 90 days Dimensional Core is expected to generate 1.08 times less return on investment than Democratic Large. But when comparing it to its historical volatility, Dimensional Core Equity is 1.03 times less risky than Democratic Large. It trades about 0.1 of its potential returns per unit of risk. Democratic Large Cap is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,389 in Democratic Large Cap on September 5, 2024 and sell it today you would earn a total of 1,366 from holding Democratic Large Cap or generate 57.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Core Equity vs. Democratic Large Cap
Performance |
| Timeline |
| Dimensional Core Equity |
| Democratic Large Cap |
Dimensional Core and Democratic Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Core and Democratic Large
The main advantage of trading using opposite Dimensional Core and Democratic Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core position performs unexpectedly, Democratic Large 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 Democratic Large will offset losses from the drop in Democratic Large's long position.| Dimensional Core vs. Vanguard Total Stock | Dimensional Core vs. SPDR SP 500 | Dimensional Core vs. iShares Core SP | Dimensional Core vs. Vanguard Dividend Appreciation |
| Democratic Large vs. Vanguard Total Stock | Democratic Large vs. SPDR SP 500 | Democratic Large vs. iShares Core SP | Democratic Large vs. Vanguard Dividend Appreciation |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
Other Complementary Tools
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences |