Correlation Between Dimensional Core and Vanguard ESG
Can any of the company-specific risk be diversified away by investing in both Dimensional Core and Vanguard ESG 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 Vanguard ESG 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 Vanguard ESG Stock, you can compare the effects of market volatilities on Dimensional Core and Vanguard ESG 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 Vanguard ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and Vanguard ESG.
Diversification Opportunities for Dimensional Core and Vanguard ESG
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Dimensional and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and Vanguard ESG Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard ESG Stock 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 Vanguard ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard ESG Stock has no effect on the direction of Dimensional Core i.e., Dimensional Core and Vanguard ESG go up and down completely randomly.
Pair Corralation between Dimensional Core and Vanguard ESG
Given the investment horizon of 90 days Dimensional Core Equity is expected to generate 1.04 times more return on investment than Vanguard ESG. However, Dimensional Core is 1.04 times more volatile than Vanguard ESG Stock. It trades about 0.17 of its potential returns per unit of risk. Vanguard ESG Stock is currently generating about 0.16 per unit of risk. If you would invest 3,452 in Dimensional Core Equity on August 24, 2024 and sell it today you would earn a total of 130.00 from holding Dimensional Core Equity or generate 3.77% 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. Vanguard ESG Stock
Performance |
| Timeline |
| Dimensional Core Equity |
| Vanguard ESG Stock |
Dimensional Core and Vanguard ESG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Core and Vanguard ESG
The main advantage of trading using opposite Dimensional Core and Vanguard ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core position performs unexpectedly, Vanguard ESG 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 Vanguard ESG will offset losses from the drop in Vanguard ESG's long position.| Dimensional Core vs. Morningstar Unconstrained Allocation | Dimensional Core vs. High Yield Municipal Fund | Dimensional Core vs. Via Renewables | Dimensional Core vs. Knife River |
| Vanguard ESG vs. Vanguard ESG International | Vanguard ESG vs. iShares ESG Aware | Vanguard ESG vs. iShares MSCI USA | Vanguard ESG vs. iShares ESG Aware |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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