Correlation Between Dimensional Core and SPDR SP
Can any of the company-specific risk be diversified away by investing in both Dimensional Core and SPDR SP 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 SPDR SP 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 SPDR SP 500, you can compare the effects of market volatilities on Dimensional Core and SPDR SP 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 SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and SPDR SP.
Diversification Opportunities for Dimensional Core and SPDR SP
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dimensional and SPDR is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and SPDR SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 500 has no effect on the direction of Dimensional Core i.e., Dimensional Core and SPDR SP go up and down completely randomly.
Pair Corralation between Dimensional Core and SPDR SP
Given the investment horizon of 90 days Dimensional Core Equity is expected to generate 0.86 times more return on investment than SPDR SP. However, Dimensional Core Equity is 1.16 times less risky than SPDR SP. It trades about 0.1 of its potential returns per unit of risk. SPDR SP 500 is currently generating about 0.02 per unit of risk. If you would invest 3,498 in Dimensional Core Equity on October 22, 2024 and sell it today you would earn a total of 49.00 from holding Dimensional Core Equity or generate 1.4% 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. SPDR SP 500
Performance |
| Timeline |
| Dimensional Core Equity |
| SPDR SP 500 |
Dimensional Core and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Core and SPDR SP
The main advantage of trading using opposite Dimensional Core and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core position performs unexpectedly, SPDR SP 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 SPDR SP will offset losses from the drop in SPDR SP'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 |
| SPDR SP vs. iShares MSCI KLD | SPDR SP vs. iShares ESG Aware | SPDR SP vs. iShares MSCI ACWI | SPDR SP vs. SPDR SSGA Gender |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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