Correlation Between Dimensional Core and Lattice Strategies
Can any of the company-specific risk be diversified away by investing in both Dimensional Core and Lattice Strategies 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 Lattice Strategies 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 Lattice Strategies Trust, you can compare the effects of market volatilities on Dimensional Core and Lattice Strategies 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 Lattice Strategies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and Lattice Strategies.
Diversification Opportunities for Dimensional Core and Lattice Strategies
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Dimensional and Lattice is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and Lattice Strategies Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lattice Strategies Trust 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 Lattice Strategies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lattice Strategies Trust has no effect on the direction of Dimensional Core i.e., Dimensional Core and Lattice Strategies go up and down completely randomly.
Pair Corralation between Dimensional Core and Lattice Strategies
Given the investment horizon of 90 days Dimensional Core Equity is expected to generate 1.11 times more return on investment than Lattice Strategies. However, Dimensional Core is 1.11 times more volatile than Lattice Strategies Trust. It trades about 0.1 of its potential returns per unit of risk. Lattice Strategies Trust is currently generating about 0.11 per unit of risk. If you would invest 2,420 in Dimensional Core Equity on August 30, 2024 and sell it today you would earn a total of 1,207 from holding Dimensional Core Equity or generate 49.88% 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. Lattice Strategies Trust
Performance |
| Timeline |
| Dimensional Core Equity |
| Lattice Strategies Trust |
Dimensional Core and Lattice Strategies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Core and Lattice Strategies
The main advantage of trading using opposite Dimensional Core and Lattice Strategies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core position performs unexpectedly, Lattice Strategies 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 Lattice Strategies will offset losses from the drop in Lattice Strategies' 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 |
| Lattice Strategies vs. JPMorgan BetaBuilders International | Lattice Strategies vs. JPMorgan Core Plus | Lattice Strategies vs. JPMorgan BetaBuilders Canada | Lattice Strategies 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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