Correlation Between Dimensional Targeted and Dimensional World
Can any of the company-specific risk be diversified away by investing in both Dimensional Targeted and Dimensional World 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 Targeted and Dimensional World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dimensional Targeted Value and Dimensional World ex, you can compare the effects of market volatilities on Dimensional Targeted and Dimensional World 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 Targeted with a short position of Dimensional World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Targeted and Dimensional World.
Diversification Opportunities for Dimensional Targeted and Dimensional World
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Dimensional and Dimensional is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Targeted Value and Dimensional World ex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional World and Dimensional Targeted 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 Targeted Value are associated (or correlated) with Dimensional World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional World has no effect on the direction of Dimensional Targeted i.e., Dimensional Targeted and Dimensional World go up and down completely randomly.
Pair Corralation between Dimensional Targeted and Dimensional World
Given the investment horizon of 90 days Dimensional Targeted Value is expected to generate 1.47 times more return on investment than Dimensional World. However, Dimensional Targeted is 1.47 times more volatile than Dimensional World ex. It trades about 0.25 of its potential returns per unit of risk. Dimensional World ex is currently generating about 0.09 per unit of risk. If you would invest 5,508 in Dimensional Targeted Value on October 20, 2024 and sell it today you would earn a total of 229.00 from holding Dimensional Targeted Value or generate 4.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Targeted Value vs. Dimensional World ex
Performance |
| Timeline |
| Dimensional Targeted |
| Dimensional World |
Dimensional Targeted and Dimensional World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Targeted and Dimensional World
The main advantage of trading using opposite Dimensional Targeted and Dimensional World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Targeted position performs unexpectedly, Dimensional World 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 Dimensional World will offset losses from the drop in Dimensional World's long position.| Dimensional Targeted vs. Dimensional Small Cap | Dimensional Targeted vs. Dimensional Core Equity | Dimensional Targeted vs. Dimensional International Value | Dimensional Targeted vs. Dimensional Equity ETF |
| Dimensional World vs. Dimensional Core Equity | Dimensional World vs. Dimensional Targeted Value | Dimensional World vs. Dimensional International Value | Dimensional World 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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