Correlation Between Dimensional Targeted and Invesco FTSE
Can any of the company-specific risk be diversified away by investing in both Dimensional Targeted and Invesco FTSE 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 Invesco FTSE 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 Invesco FTSE RAFI, you can compare the effects of market volatilities on Dimensional Targeted and Invesco FTSE 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 Invesco FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Targeted and Invesco FTSE.
Diversification Opportunities for Dimensional Targeted and Invesco FTSE
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dimensional and Invesco is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Targeted Value and Invesco FTSE RAFI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco FTSE RAFI 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 Invesco FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco FTSE RAFI has no effect on the direction of Dimensional Targeted i.e., Dimensional Targeted and Invesco FTSE go up and down completely randomly.
Pair Corralation between Dimensional Targeted and Invesco FTSE
Given the investment horizon of 90 days Dimensional Targeted Value is expected to generate 1.51 times more return on investment than Invesco FTSE. However, Dimensional Targeted is 1.51 times more volatile than Invesco FTSE RAFI. It trades about 0.08 of its potential returns per unit of risk. Invesco FTSE RAFI is currently generating about 0.05 per unit of risk. If you would invest 4,175 in Dimensional Targeted Value on August 27, 2024 and sell it today you would earn a total of 1,843 from holding Dimensional Targeted Value or generate 44.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Targeted Value vs. Invesco FTSE RAFI
Performance |
| Timeline |
| Dimensional Targeted |
| Invesco FTSE RAFI |
Dimensional Targeted and Invesco FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Targeted and Invesco FTSE
The main advantage of trading using opposite Dimensional Targeted and Invesco FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Targeted position performs unexpectedly, Invesco FTSE 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 FTSE will offset losses from the drop in Invesco FTSE'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 |
| Invesco FTSE vs. Dimensional Targeted Value | Invesco FTSE vs. Dimensional Small Cap | Invesco FTSE vs. Dimensional Marketwide Value | Invesco FTSE vs. Dimensional Core Equity |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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