Correlation Between Dimensional Small and SPDR SSGA
Can any of the company-specific risk be diversified away by investing in both Dimensional Small and SPDR SSGA 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 SPDR SSGA 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 SPDR SSGA Small, you can compare the effects of market volatilities on Dimensional Small and SPDR SSGA 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 SPDR SSGA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Small and SPDR SSGA.
Diversification Opportunities for Dimensional Small and SPDR SSGA
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dimensional and SPDR is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Small Cap and SPDR SSGA Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSGA 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 SPDR SSGA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSGA Small has no effect on the direction of Dimensional Small i.e., Dimensional Small and SPDR SSGA go up and down completely randomly.
Pair Corralation between Dimensional Small and SPDR SSGA
Given the investment horizon of 90 days Dimensional Small is expected to generate 1.3 times less return on investment than SPDR SSGA. But when comparing it to its historical volatility, Dimensional Small Cap is 1.49 times less risky than SPDR SSGA. It trades about 0.25 of its potential returns per unit of risk. SPDR SSGA Small is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 12,529 in SPDR SSGA Small on August 25, 2024 and sell it today you would earn a total of 1,377 from holding SPDR SSGA Small or generate 10.99% 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. SPDR SSGA Small
Performance |
| Timeline |
| Dimensional Small Cap |
| SPDR SSGA Small |
Dimensional Small and SPDR SSGA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Small and SPDR SSGA
The main advantage of trading using opposite Dimensional Small and SPDR SSGA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Small position performs unexpectedly, SPDR SSGA 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 SPDR SSGA will offset losses from the drop in SPDR SSGA'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 |
| SPDR SSGA vs. SPDR SSGA Large | SPDR SSGA vs. Invesco SP SmallCap | SPDR SSGA vs. Invesco SP MidCap | SPDR SSGA vs. SPDR MSCI EAFE |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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