Correlation Between Dimensional Core and FFEM
Can any of the company-specific risk be diversified away by investing in both Dimensional Core and FFEM 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 FFEM 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 FFEM, you can compare the effects of market volatilities on Dimensional Core and FFEM 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 FFEM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and FFEM.
Diversification Opportunities for Dimensional Core and FFEM
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dimensional and FFEM is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and FFEM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FFEM 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 FFEM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FFEM has no effect on the direction of Dimensional Core i.e., Dimensional Core and FFEM go up and down completely randomly.
Pair Corralation between Dimensional Core and FFEM
Given the investment horizon of 90 days Dimensional Core Equity is expected to generate 1.03 times more return on investment than FFEM. However, Dimensional Core is 1.03 times more volatile than FFEM. It trades about 0.16 of its potential returns per unit of risk. FFEM is currently generating about -0.07 per unit of risk. If you would invest 3,498 in Dimensional Core Equity on October 23, 2024 and sell it today you would earn a total of 86.00 from holding Dimensional Core Equity or generate 2.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
Dimensional Core Equity vs. FFEM
Performance |
| Timeline |
| Dimensional Core Equity |
| FFEM |
Dimensional Core and FFEM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Core and FFEM
The main advantage of trading using opposite Dimensional Core and FFEM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core position performs unexpectedly, FFEM 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 FFEM will offset losses from the drop in FFEM'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 |
| FFEM vs. Freedom Day Dividend | FFEM vs. iShares MSCI China | FFEM vs. SmartETFs Dividend Builder | FFEM vs. Tidal ETF Trust |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. |