Correlation Between Dimensional Core and FlexShares Quality
Can any of the company-specific risk be diversified away by investing in both Dimensional Core and FlexShares Quality 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 FlexShares Quality 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 FlexShares Quality Low, you can compare the effects of market volatilities on Dimensional Core and FlexShares Quality 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 FlexShares Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and FlexShares Quality.
Diversification Opportunities for Dimensional Core and FlexShares Quality
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dimensional and FlexShares is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and FlexShares Quality Low in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Quality Low 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 FlexShares Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Quality Low has no effect on the direction of Dimensional Core i.e., Dimensional Core and FlexShares Quality go up and down completely randomly.
Pair Corralation between Dimensional Core and FlexShares Quality
Given the investment horizon of 90 days Dimensional Core Equity is expected to generate 1.61 times more return on investment than FlexShares Quality. However, Dimensional Core is 1.61 times more volatile than FlexShares Quality Low. It trades about 0.35 of its potential returns per unit of risk. FlexShares Quality Low is currently generating about 0.33 per unit of risk. If you would invest 3,413 in Dimensional Core Equity on September 2, 2024 and sell it today you would earn a total of 232.00 from holding Dimensional Core Equity or generate 6.8% 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. FlexShares Quality Low
Performance |
| Timeline |
| Dimensional Core Equity |
| FlexShares Quality Low |
Dimensional Core and FlexShares Quality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Core and FlexShares Quality
The main advantage of trading using opposite Dimensional Core and FlexShares Quality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core position performs unexpectedly, FlexShares Quality 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 FlexShares Quality will offset losses from the drop in FlexShares Quality'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 |
| FlexShares Quality vs. Vanguard Total Stock | FlexShares Quality vs. SPDR SP 500 | FlexShares Quality vs. iShares Core SP | FlexShares Quality vs. Vanguard Dividend Appreciation |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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