Correlation Between Dimensional Core and Invesco SP
Can any of the company-specific risk be diversified away by investing in both Dimensional Core and Invesco 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 Invesco 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 Invesco SP 500, you can compare the effects of market volatilities on Dimensional Core and Invesco 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 Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and Invesco SP.
Diversification Opportunities for Dimensional Core and Invesco SP
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dimensional and Invesco is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco 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 Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP 500 has no effect on the direction of Dimensional Core i.e., Dimensional Core and Invesco SP go up and down completely randomly.
Pair Corralation between Dimensional Core and Invesco SP
Given the investment horizon of 90 days Dimensional Core Equity is expected to generate 1.73 times more return on investment than Invesco SP. However, Dimensional Core is 1.73 times more volatile than Invesco SP 500. It trades about 0.22 of its potential returns per unit of risk. Invesco SP 500 is currently generating about 0.37 per unit of risk. If you would invest 3,460 in Dimensional Core Equity on August 31, 2024 and sell it today you would earn a total of 167.00 from holding Dimensional Core Equity or generate 4.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Dimensional Core Equity vs. Invesco SP 500
Performance |
| Timeline |
| Dimensional Core Equity |
| Invesco SP 500 |
Dimensional Core and Invesco SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Core and Invesco SP
The main advantage of trading using opposite Dimensional Core and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core position performs unexpectedly, Invesco 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 Invesco SP will offset losses from the drop in Invesco 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 |
| Invesco SP vs. Vanguard Total Stock | Invesco SP vs. SPDR SP 500 | Invesco SP vs. iShares Core SP | Invesco SP vs. Vanguard Dividend Appreciation |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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