Correlation Between Dimensional Small and Schwab Fundamental
Can any of the company-specific risk be diversified away by investing in both Dimensional Small and Schwab Fundamental 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 Schwab Fundamental 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 Schwab Fundamental Small, you can compare the effects of market volatilities on Dimensional Small and Schwab Fundamental 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 Schwab Fundamental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Small and Schwab Fundamental.
Diversification Opportunities for Dimensional Small and Schwab Fundamental
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Dimensional and Schwab is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Small Cap and Schwab Fundamental Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Fundamental Small 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 Schwab Fundamental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Fundamental Small has no effect on the direction of Dimensional Small i.e., Dimensional Small and Schwab Fundamental go up and down completely randomly.
Pair Corralation between Dimensional Small and Schwab Fundamental
Given the investment horizon of 90 days Dimensional Small Cap is expected to generate 1.11 times more return on investment than Schwab Fundamental. However, Dimensional Small is 1.11 times more volatile than Schwab Fundamental Small. It trades about 0.23 of its potential returns per unit of risk. Schwab Fundamental Small is currently generating about 0.25 per unit of risk. If you would invest 6,497 in Dimensional Small Cap on August 30, 2024 and sell it today you would earn a total of 542.00 from holding Dimensional Small Cap or generate 8.34% 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. Schwab Fundamental Small
Performance |
| Timeline |
| Dimensional Small Cap |
| Schwab Fundamental Small |
Dimensional Small and Schwab Fundamental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Small and Schwab Fundamental
The main advantage of trading using opposite Dimensional Small and Schwab Fundamental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Small position performs unexpectedly, Schwab Fundamental 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 Schwab Fundamental will offset losses from the drop in Schwab Fundamental'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 |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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