Correlation Between Dimensional Core and WisdomTree High
Can any of the company-specific risk be diversified away by investing in both Dimensional Core and WisdomTree High 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 WisdomTree High 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 WisdomTree High Yield, you can compare the effects of market volatilities on Dimensional Core and WisdomTree High 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 WisdomTree High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and WisdomTree High.
Diversification Opportunities for Dimensional Core and WisdomTree High
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dimensional and WisdomTree is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and WisdomTree High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree High Yield 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 WisdomTree High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree High Yield has no effect on the direction of Dimensional Core i.e., Dimensional Core and WisdomTree High go up and down completely randomly.
Pair Corralation between Dimensional Core and WisdomTree High
Given the investment horizon of 90 days Dimensional Core Equity is expected to generate 4.78 times more return on investment than WisdomTree High. However, Dimensional Core is 4.78 times more volatile than WisdomTree High Yield. It trades about 0.13 of its potential returns per unit of risk. WisdomTree High Yield is currently generating about 0.11 per unit of risk. If you would invest 2,440 in Dimensional Core Equity on August 26, 2024 and sell it today you would earn a total of 1,166 from holding Dimensional Core Equity or generate 47.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Core Equity vs. WisdomTree High Yield
Performance |
| Timeline |
| Dimensional Core Equity |
| WisdomTree High Yield |
Dimensional Core and WisdomTree High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Core and WisdomTree High
The main advantage of trading using opposite Dimensional Core and WisdomTree High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core position performs unexpectedly, WisdomTree High 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 WisdomTree High will offset losses from the drop in WisdomTree High'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 |
| WisdomTree High vs. Dimensional ETF Trust | WisdomTree High vs. Dimensional ETF Trust | WisdomTree High vs. Dimensional Core Equity | WisdomTree High vs. Dimensional 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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