Correlation Between Dimensional Targeted and SPDR SP
Can any of the company-specific risk be diversified away by investing in both Dimensional Targeted 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 Targeted 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 Targeted Value and SPDR SP 600, you can compare the effects of market volatilities on Dimensional Targeted 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 Targeted with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Targeted and SPDR SP.
Diversification Opportunities for Dimensional Targeted and SPDR SP
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dimensional and SPDR is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Targeted Value and SPDR SP 600 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 600 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 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 600 has no effect on the direction of Dimensional Targeted i.e., Dimensional Targeted and SPDR SP go up and down completely randomly.
Pair Corralation between Dimensional Targeted and SPDR SP
Given the investment horizon of 90 days Dimensional Targeted Value is expected to generate 0.94 times more return on investment than SPDR SP. However, Dimensional Targeted Value is 1.07 times less risky than SPDR SP. It trades about 0.16 of its potential returns per unit of risk. SPDR SP 600 is currently generating about 0.09 per unit of risk. If you would invest 5,633 in Dimensional Targeted Value on October 26, 2024 and sell it today you would earn a total of 147.00 from holding Dimensional Targeted Value or generate 2.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Targeted Value vs. SPDR SP 600
Performance |
| Timeline |
| Dimensional Targeted |
| SPDR SP 600 |
Dimensional Targeted and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Targeted and SPDR SP
The main advantage of trading using opposite Dimensional Targeted and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Targeted 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 Targeted vs. Dimensional Small Cap | Dimensional Targeted vs. Dimensional Core Equity | Dimensional Targeted vs. Dimensional International Value | Dimensional Targeted vs. Dimensional Equity ETF |
| SPDR SP vs. Dimensional ETF Trust | SPDR SP vs. Vanguard Small Cap Index | SPDR SP vs. First Trust Multi Manager | SPDR SP vs. Vanguard SP 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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