Correlation Between Dimensional Small and SPDR SP
Can any of the company-specific risk be diversified away by investing in both Dimensional Small and SPDR 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 SPDR 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 SPDR SP World, you can compare the effects of market volatilities on Dimensional Small and SPDR 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 SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Small and SPDR SP.
Diversification Opportunities for Dimensional Small and SPDR SP
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dimensional and SPDR is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Small Cap and SPDR SP World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP World 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 SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP World has no effect on the direction of Dimensional Small i.e., Dimensional Small and SPDR SP go up and down completely randomly.
Pair Corralation between Dimensional Small and SPDR SP
Given the investment horizon of 90 days Dimensional Small Cap is expected to generate 1.48 times more return on investment than SPDR SP. However, Dimensional Small is 1.48 times more volatile than SPDR SP World. It trades about 0.11 of its potential returns per unit of risk. SPDR SP World is currently generating about 0.01 per unit of risk. If you would invest 6,041 in Dimensional Small Cap on August 28, 2024 and sell it today you would earn a total of 1,074 from holding Dimensional Small Cap or generate 17.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Small Cap vs. SPDR SP World
Performance |
| Timeline |
| Dimensional Small Cap |
| SPDR SP World |
Dimensional Small and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Small and SPDR SP
The main advantage of trading using opposite Dimensional Small and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Small position performs unexpectedly, SPDR 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 SPDR SP will offset losses from the drop in SPDR 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 |
| SPDR SP vs. Dimensional Core Equity | SPDR SP vs. Dimensional Emerging Core | SPDR SP vs. Dimensional Targeted Value | SPDR 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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