Correlation Between Dimensional Small and Dimensional Marketwide
Can any of the company-specific risk be diversified away by investing in both Dimensional Small and Dimensional Marketwide 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 Dimensional Marketwide 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 Dimensional Marketwide Value, you can compare the effects of market volatilities on Dimensional Small and Dimensional Marketwide 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 Dimensional Marketwide. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Small and Dimensional Marketwide.
Diversification Opportunities for Dimensional Small and Dimensional Marketwide
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dimensional and Dimensional is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Small Cap and Dimensional Marketwide Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Marketwide 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 Dimensional Marketwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Marketwide has no effect on the direction of Dimensional Small i.e., Dimensional Small and Dimensional Marketwide go up and down completely randomly.
Pair Corralation between Dimensional Small and Dimensional Marketwide
Given the investment horizon of 90 days Dimensional Small Cap is expected to generate 1.44 times more return on investment than Dimensional Marketwide. However, Dimensional Small is 1.44 times more volatile than Dimensional Marketwide Value. It trades about 0.07 of its potential returns per unit of risk. Dimensional Marketwide Value is currently generating about 0.1 per unit of risk. If you would invest 5,365 in Dimensional Small Cap on August 28, 2024 and sell it today you would earn a total of 1,750 from holding Dimensional Small Cap or generate 32.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Small Cap vs. Dimensional Marketwide Value
Performance |
| Timeline |
| Dimensional Small Cap |
| Dimensional Marketwide |
Dimensional Small and Dimensional Marketwide Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Small and Dimensional Marketwide
The main advantage of trading using opposite Dimensional Small and Dimensional Marketwide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Small position performs unexpectedly, Dimensional Marketwide 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 Dimensional Marketwide will offset losses from the drop in Dimensional Marketwide's long position.| Dimensional Small vs. Dimensional Targeted Value | Dimensional Small vs. Dimensional Equity ETF | Dimensional Small vs. Dimensional Core Equity | Dimensional Small vs. Dimensional International Core |
| Dimensional Marketwide vs. BlackRock ETF Trust | Dimensional Marketwide vs. Rbb Fund | Dimensional Marketwide vs. Virtus ETF Trust | Dimensional Marketwide vs. Amplify CWP Enhanced |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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