Correlation Between Dimensional Core and Alpha Architect
Can any of the company-specific risk be diversified away by investing in both Dimensional Core and Alpha Architect 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 Alpha Architect 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 Alpha Architect International, you can compare the effects of market volatilities on Dimensional Core and Alpha Architect 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 Alpha Architect. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and Alpha Architect.
Diversification Opportunities for Dimensional Core and Alpha Architect
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dimensional and Alpha is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and Alpha Architect International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Architect Inte 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 Alpha Architect. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Architect Inte has no effect on the direction of Dimensional Core i.e., Dimensional Core and Alpha Architect go up and down completely randomly.
Pair Corralation between Dimensional Core and Alpha Architect
Given the investment horizon of 90 days Dimensional Core Equity is expected to generate 1.13 times more return on investment than Alpha Architect. However, Dimensional Core is 1.13 times more volatile than Alpha Architect International. It trades about 0.22 of its potential returns per unit of risk. Alpha Architect International is currently generating about -0.08 per unit of risk. If you would invest 3,465 in Dimensional Core Equity on August 30, 2024 and sell it today you would earn a total of 162.00 from holding Dimensional Core Equity or generate 4.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Core Equity vs. Alpha Architect International
Performance |
| Timeline |
| Dimensional Core Equity |
| Alpha Architect Inte |
Dimensional Core and Alpha Architect Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Core and Alpha Architect
The main advantage of trading using opposite Dimensional Core and Alpha Architect positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core position performs unexpectedly, Alpha Architect 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 Alpha Architect will offset losses from the drop in Alpha Architect'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 |
| Alpha Architect vs. Davis Select International | Alpha Architect vs. Tidal ETF Trust | Alpha Architect vs. Principal Value ETF | Alpha Architect vs. WisdomTree 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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