Correlation Between Dimensional Core and Pacer Lunt
Can any of the company-specific risk be diversified away by investing in both Dimensional Core and Pacer Lunt 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 Pacer Lunt 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 Pacer Lunt Large, you can compare the effects of market volatilities on Dimensional Core and Pacer Lunt 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 Pacer Lunt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and Pacer Lunt.
Diversification Opportunities for Dimensional Core and Pacer Lunt
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dimensional and Pacer is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and Pacer Lunt Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Lunt Large 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 Pacer Lunt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Lunt Large has no effect on the direction of Dimensional Core i.e., Dimensional Core and Pacer Lunt go up and down completely randomly.
Pair Corralation between Dimensional Core and Pacer Lunt
Given the investment horizon of 90 days Dimensional Core Equity is expected to generate 0.87 times more return on investment than Pacer Lunt. However, Dimensional Core Equity is 1.15 times less risky than Pacer Lunt. It trades about 0.16 of its potential returns per unit of risk. Pacer Lunt Large is currently generating about 0.14 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 | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Core Equity vs. Pacer Lunt Large
Performance |
| Timeline |
| Dimensional Core Equity |
| Pacer Lunt Large |
Dimensional Core and Pacer Lunt Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Core and Pacer Lunt
The main advantage of trading using opposite Dimensional Core and Pacer Lunt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core position performs unexpectedly, Pacer Lunt 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 Pacer Lunt will offset losses from the drop in Pacer Lunt'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 |
| Pacer Lunt vs. Pacer Lunt Large | Pacer Lunt vs. Pacer Lunt MidCap | Pacer Lunt vs. Pacer Trendpilot Bond | Pacer Lunt vs. Pacer Small Cap |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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