Correlation Between Dimensional Core and Vanguard Total
Can any of the company-specific risk be diversified away by investing in both Dimensional Core and Vanguard Total 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 Vanguard Total 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 Vanguard Total Stock, you can compare the effects of market volatilities on Dimensional Core and Vanguard Total 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 Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and Vanguard Total.
Diversification Opportunities for Dimensional Core and Vanguard Total
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Dimensional and Vanguard is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and Vanguard Total Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Stock 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 Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Stock has no effect on the direction of Dimensional Core i.e., Dimensional Core and Vanguard Total go up and down completely randomly.
Pair Corralation between Dimensional Core and Vanguard Total
Given the investment horizon of 90 days Dimensional Core is expected to generate 1.01 times less return on investment than Vanguard Total. In addition to that, Dimensional Core is 1.03 times more volatile than Vanguard Total Stock. It trades about 0.14 of its total potential returns per unit of risk. Vanguard Total Stock is currently generating about 0.14 per unit of volatility. If you would invest 25,877 in Vanguard Total Stock on September 2, 2024 and sell it today you would earn a total of 4,109 from holding Vanguard Total Stock or generate 15.88% 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. Vanguard Total Stock
Performance |
| Timeline |
| Dimensional Core Equity |
| Vanguard Total Stock |
Dimensional Core and Vanguard Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Core and Vanguard Total
The main advantage of trading using opposite Dimensional Core and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core position performs unexpectedly, Vanguard Total 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 Vanguard Total will offset losses from the drop in Vanguard Total'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 |
| Vanguard Total vs. Vanguard SP 500 | Vanguard Total vs. Vanguard Total International | Vanguard Total vs. Vanguard Real Estate | Vanguard Total vs. Vanguard Total Bond |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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