Correlation Between Dimensional Core and First Trust
Can any of the company-specific risk be diversified away by investing in both Dimensional Core and First Trust 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 First Trust 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 First Trust Dorsey, you can compare the effects of market volatilities on Dimensional Core and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and First Trust.
Diversification Opportunities for Dimensional Core and First Trust
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dimensional and First is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and First Trust Dorsey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Dorsey 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Dorsey has no effect on the direction of Dimensional Core i.e., Dimensional Core and First Trust go up and down completely randomly.
Pair Corralation between Dimensional Core and First Trust
Given the investment horizon of 90 days Dimensional Core is expected to generate 1.62 times less return on investment than First Trust. In addition to that, Dimensional Core is 1.02 times more volatile than First Trust Dorsey. It trades about 0.17 of its total potential returns per unit of risk. First Trust Dorsey is currently generating about 0.28 per unit of volatility. If you would invest 3,315 in First Trust Dorsey on August 29, 2024 and sell it today you would earn a total of 332.00 from holding First Trust Dorsey or generate 10.02% 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. First Trust Dorsey
Performance |
| Timeline |
| Dimensional Core Equity |
| First Trust Dorsey |
Dimensional Core and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Core and First Trust
The main advantage of trading using opposite Dimensional Core and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust'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 |
| First Trust vs. JPMorgan BetaBuilders International | First Trust vs. JPMorgan Core Plus | First Trust vs. JPMorgan BetaBuilders Canada | First Trust vs. JPMorgan Emerging Markets |
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.
Other Complementary Tools
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device |