Correlation Between Dimensional Core and ProShares
Can any of the company-specific risk be diversified away by investing in both Dimensional Core and ProShares 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 ProShares 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 ProShares SP 500, you can compare the effects of market volatilities on Dimensional Core and ProShares 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 ProShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and ProShares.
Diversification Opportunities for Dimensional Core and ProShares
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Dimensional and ProShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and ProShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares 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 ProShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares SP 500 has no effect on the direction of Dimensional Core i.e., Dimensional Core and ProShares go up and down completely randomly.
Pair Corralation between Dimensional Core and ProShares
Given the investment horizon of 90 days Dimensional Core Equity is expected to generate 1.07 times more return on investment than ProShares. However, Dimensional Core is 1.07 times more volatile than ProShares SP 500. It trades about 0.19 of its potential returns per unit of risk. ProShares SP 500 is currently generating about 0.17 per unit of risk. If you would invest 3,468 in Dimensional Core Equity on August 27, 2024 and sell it today you would earn a total of 138.00 from holding Dimensional Core Equity or generate 3.98% 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. ProShares SP 500
Performance |
| Timeline |
| Dimensional Core Equity |
| ProShares SP 500 |
Dimensional Core and ProShares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Core and ProShares
The main advantage of trading using opposite Dimensional Core and ProShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core position performs unexpectedly, ProShares 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 ProShares will offset losses from the drop in ProShares' long position.| Dimensional Core vs. Morningstar Unconstrained Allocation | Dimensional Core vs. High Yield Municipal Fund | Dimensional Core vs. Via Renewables | Dimensional Core vs. Knife River |
| ProShares vs. Morningstar Unconstrained Allocation | ProShares vs. High Yield Municipal Fund | ProShares vs. Via Renewables | ProShares vs. Knife River |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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