Correlation Between Dimensional Core and Xtrackers
Can any of the company-specific risk be diversified away by investing in both Dimensional Core and Xtrackers 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 Xtrackers 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 Xtrackers SP 500, you can compare the effects of market volatilities on Dimensional Core and Xtrackers 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 Xtrackers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and Xtrackers.
Diversification Opportunities for Dimensional Core and Xtrackers
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Dimensional and Xtrackers is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and Xtrackers SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers SP 500 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 Xtrackers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers SP 500 has no effect on the direction of Dimensional Core i.e., Dimensional Core and Xtrackers go up and down completely randomly.
Pair Corralation between Dimensional Core and Xtrackers
Given the investment horizon of 90 days Dimensional Core is expected to generate 1.13 times less return on investment than Xtrackers. In addition to that, Dimensional Core is 1.02 times more volatile than Xtrackers SP 500. It trades about 0.1 of its total potential returns per unit of risk. Xtrackers SP 500 is currently generating about 0.11 per unit of volatility. If you would invest 3,456 in Xtrackers SP 500 on August 30, 2024 and sell it today you would earn a total of 2,018 from holding Xtrackers SP 500 or generate 58.39% 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. Xtrackers SP 500
Performance |
| Timeline |
| Dimensional Core Equity |
| Xtrackers SP 500 |
Dimensional Core and Xtrackers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Core and Xtrackers
The main advantage of trading using opposite Dimensional Core and Xtrackers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core position performs unexpectedly, Xtrackers 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 Xtrackers will offset losses from the drop in Xtrackers' 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 |
| Xtrackers vs. Xtrackers MSCI USA | Xtrackers vs. iShares ESG MSCI | Xtrackers vs. SPDR SP 500 | Xtrackers vs. iShares MSCI USA |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
Other Complementary Tools
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios |