Correlation Between Dimensional Small and Xtrackers MSCI
Can any of the company-specific risk be diversified away by investing in both Dimensional Small and Xtrackers MSCI 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 Small and Xtrackers MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dimensional Small Cap and Xtrackers MSCI EAFE, you can compare the effects of market volatilities on Dimensional Small and Xtrackers MSCI 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 Small with a short position of Xtrackers MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Small and Xtrackers MSCI.
Diversification Opportunities for Dimensional Small and Xtrackers MSCI
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Dimensional and Xtrackers is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Small Cap and Xtrackers MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers MSCI EAFE and Dimensional Small 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 Small Cap are associated (or correlated) with Xtrackers MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers MSCI EAFE has no effect on the direction of Dimensional Small i.e., Dimensional Small and Xtrackers MSCI go up and down completely randomly.
Pair Corralation between Dimensional Small and Xtrackers MSCI
Given the investment horizon of 90 days Dimensional Small Cap is expected to generate 1.58 times more return on investment than Xtrackers MSCI. However, Dimensional Small is 1.58 times more volatile than Xtrackers MSCI EAFE. It trades about 0.08 of its potential returns per unit of risk. Xtrackers MSCI EAFE is currently generating about 0.05 per unit of risk. If you would invest 5,973 in Dimensional Small Cap on August 25, 2024 and sell it today you would earn a total of 1,026 from holding Dimensional Small Cap or generate 17.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Small Cap vs. Xtrackers MSCI EAFE
Performance |
| Timeline |
| Dimensional Small Cap |
| Xtrackers MSCI EAFE |
Dimensional Small and Xtrackers MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Small and Xtrackers MSCI
The main advantage of trading using opposite Dimensional Small and Xtrackers MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Small position performs unexpectedly, Xtrackers MSCI 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 Xtrackers MSCI will offset losses from the drop in Xtrackers MSCI's long position.| Dimensional Small vs. Invesco PureBeta MSCI | Dimensional Small vs. Aquagold International | Dimensional Small vs. Morningstar Unconstrained Allocation | Dimensional Small vs. High Yield Municipal Fund |
| Xtrackers MSCI vs. Dimensional Core Equity | Xtrackers MSCI vs. Dimensional Emerging Core | Xtrackers MSCI vs. Dimensional Targeted Value | Xtrackers MSCI vs. Dimensional Small Cap |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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