Correlation Between Dimensional Core and Dimensional International
Can any of the company-specific risk be diversified away by investing in both Dimensional Core 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 Dimensional Core and Dimensional International 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 Dimensional International Core, you can compare the effects of market volatilities on Dimensional Core 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 Dimensional Core with a short position of Dimensional International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and Dimensional International.
Diversification Opportunities for Dimensional Core and Dimensional International
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dimensional and Dimensional is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and Dimensional International Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional International 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 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 Dimensional Core i.e., Dimensional Core and Dimensional International go up and down completely randomly.
Pair Corralation between Dimensional Core and Dimensional International
Given the investment horizon of 90 days Dimensional Core Equity is expected to generate 1.03 times more return on investment than Dimensional International. However, Dimensional Core is 1.03 times more volatile than Dimensional International Core. It trades about 0.13 of its potential returns per unit of risk. Dimensional International Core is currently generating about 0.05 per unit of risk. If you would invest 2,904 in Dimensional Core Equity on August 28, 2024 and sell it today you would earn a total of 726.00 from holding Dimensional Core Equity or generate 25.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Core Equity vs. Dimensional International Core
Performance |
| Timeline |
| Dimensional Core Equity |
| Dimensional International |
Dimensional Core and Dimensional International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Core and Dimensional International
The main advantage of trading using opposite Dimensional Core and Dimensional International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core 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.| Dimensional Core vs. Dimensional Targeted Value | Dimensional Core vs. Dimensional World ex | Dimensional Core vs. Dimensional Small Cap | Dimensional Core vs. Dimensional Core Equity |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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