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 SmallCap, 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
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Dimensional and Invesco is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Small Cap and Invesco SP SmallCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP SmallCap 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 SmallCap 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 is expected to generate 1.2 times less return on investment than Invesco SP. But when comparing it to its historical volatility, Dimensional Small Cap is 1.16 times less risky than Invesco SP. It trades about 0.17 of its potential returns per unit of risk. Invesco SP SmallCap is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 6,309 in Invesco SP SmallCap on September 2, 2024 and sell it today you would earn a total of 1,010 from holding Invesco SP SmallCap or generate 16.01% 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. Invesco SP SmallCap
Performance |
| Timeline |
| Dimensional Small Cap |
| Invesco SP SmallCap |
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. iShares SP Mid Cap | Invesco SP vs. iShares SP Small Cap | Invesco SP vs. iShares SP Mid Cap | Invesco SP vs. iShares SP 500 |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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