Correlation Between Dimensional Core and Foundations Dynamic
Can any of the company-specific risk be diversified away by investing in both Dimensional Core and Foundations Dynamic 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 Foundations Dynamic 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 Foundations Dynamic Core, you can compare the effects of market volatilities on Dimensional Core and Foundations Dynamic 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 Foundations Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and Foundations Dynamic.
Diversification Opportunities for Dimensional Core and Foundations Dynamic
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Dimensional and Foundations is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and Foundations Dynamic Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foundations Dynamic Core 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 Foundations Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foundations Dynamic Core has no effect on the direction of Dimensional Core i.e., Dimensional Core and Foundations Dynamic go up and down completely randomly.
Pair Corralation between Dimensional Core and Foundations Dynamic
Given the investment horizon of 90 days Dimensional Core Equity is expected to generate 0.95 times more return on investment than Foundations Dynamic. However, Dimensional Core Equity is 1.06 times less risky than Foundations Dynamic. It trades about 0.13 of its potential returns per unit of risk. Foundations Dynamic Core is currently generating about 0.12 per unit of risk. If you would invest 3,162 in Dimensional Core Equity on September 1, 2024 and sell it today you would earn a total of 483.00 from holding Dimensional Core Equity or generate 15.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Dimensional Core Equity vs. Foundations Dynamic Core
Performance |
| Timeline |
| Dimensional Core Equity |
| Foundations Dynamic Core |
Dimensional Core and Foundations Dynamic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Core and Foundations Dynamic
The main advantage of trading using opposite Dimensional Core and Foundations Dynamic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core position performs unexpectedly, Foundations Dynamic 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 Foundations Dynamic will offset losses from the drop in Foundations Dynamic'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 |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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