Correlation Between Dimensional Core and Simplify Equity
Can any of the company-specific risk be diversified away by investing in both Dimensional Core and Simplify Equity 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 Simplify Equity 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 Simplify Equity PLUS, you can compare the effects of market volatilities on Dimensional Core and Simplify Equity 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 Simplify Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and Simplify Equity.
Diversification Opportunities for Dimensional Core and Simplify Equity
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Dimensional and Simplify is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and Simplify Equity PLUS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Equity PLUS 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 Simplify Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Equity PLUS has no effect on the direction of Dimensional Core i.e., Dimensional Core and Simplify Equity go up and down completely randomly.
Pair Corralation between Dimensional Core and Simplify Equity
Given the investment horizon of 90 days Dimensional Core is expected to generate 1.18 times less return on investment than Simplify Equity. But when comparing it to its historical volatility, Dimensional Core Equity is 1.38 times less risky than Simplify Equity. It trades about 0.37 of its potential returns per unit of risk. Simplify Equity PLUS is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 4,147 in Simplify Equity PLUS on September 1, 2024 and sell it today you would earn a total of 369.00 from holding Simplify Equity PLUS or generate 8.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dimensional Core Equity vs. Simplify Equity PLUS
Performance |
| Timeline |
| Dimensional Core Equity |
| Simplify Equity PLUS |
Dimensional Core and Simplify Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Core and Simplify Equity
The main advantage of trading using opposite Dimensional Core and Simplify Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core position performs unexpectedly, Simplify Equity 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 Simplify Equity will offset losses from the drop in Simplify Equity'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 |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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