Correlation Between Dimensional Small and Invesco SP
Can any of the company-specific risk be diversified away by investing in both Dimensional Small 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 Small 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 Small Cap and Invesco SP International, you can compare the effects of market volatilities on Dimensional Small 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 Small with a short position of Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Small and Invesco SP.
Diversification Opportunities for Dimensional Small and Invesco SP
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dimensional and Invesco is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Small Cap and Invesco SP International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP International 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 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 International has no effect on the direction of Dimensional Small i.e., Dimensional Small and Invesco SP go up and down completely randomly.
Pair Corralation between Dimensional Small and Invesco SP
Given the investment horizon of 90 days Dimensional Small Cap is expected to generate 2.3 times more return on investment than Invesco SP. However, Dimensional Small is 2.3 times more volatile than Invesco SP International. It trades about 0.16 of its potential returns per unit of risk. Invesco SP International is currently generating about -0.25 per unit of risk. If you would invest 6,472 in Dimensional Small Cap on August 28, 2024 and sell it today you would earn a total of 589.00 from holding Dimensional Small Cap or generate 9.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Small Cap vs. Invesco SP International
Performance |
| Timeline |
| Dimensional Small Cap |
| Invesco SP International |
Dimensional Small and Invesco SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Small and Invesco SP
The main advantage of trading using opposite Dimensional Small and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Small 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 Small vs. Dimensional Targeted Value | Dimensional Small vs. Dimensional Equity ETF | Dimensional Small vs. Dimensional Core Equity | Dimensional Small vs. Dimensional International Core |
| Invesco SP vs. Dimensional Core Equity | Invesco SP vs. Dimensional Emerging Core | Invesco SP vs. Dimensional Targeted Value | Invesco SP 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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