Correlation Between Dimensional Core and Vanguard Large
Can any of the company-specific risk be diversified away by investing in both Dimensional Core and Vanguard Large 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 Large 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 Large Cap Index, you can compare the effects of market volatilities on Dimensional Core and Vanguard Large 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 Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and Vanguard Large.
Diversification Opportunities for Dimensional Core and Vanguard Large
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Dimensional and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and Vanguard Large Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Large Cap 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 Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Large Cap has no effect on the direction of Dimensional Core i.e., Dimensional Core and Vanguard Large go up and down completely randomly.
Pair Corralation between Dimensional Core and Vanguard Large
Given the investment horizon of 90 days Dimensional Core is expected to generate 1.13 times less return on investment than Vanguard Large. In addition to that, Dimensional Core is 1.03 times more volatile than Vanguard Large Cap Index. It trades about 0.1 of its total potential returns per unit of risk. Vanguard Large Cap Index is currently generating about 0.11 per unit of volatility. If you would invest 17,647 in Vanguard Large Cap Index on September 2, 2024 and sell it today you would earn a total of 10,087 from holding Vanguard Large Cap Index or generate 57.16% 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 Large Cap Index
Performance |
| Timeline |
| Dimensional Core Equity |
| Vanguard Large Cap |
Dimensional Core and Vanguard Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Core and Vanguard Large
The main advantage of trading using opposite Dimensional Core and Vanguard Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core position performs unexpectedly, Vanguard Large 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 Large will offset losses from the drop in Vanguard Large'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 Large vs. Vanguard Mid Cap Index | Vanguard Large vs. Vanguard Small Cap Index | Vanguard Large vs. Vanguard Extended Market | Vanguard Large vs. Vanguard Small Cap Growth |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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