Correlation Between Dimensional Targeted and Themes Small
Can any of the company-specific risk be diversified away by investing in both Dimensional Targeted and Themes Small 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 Themes Small 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 Themes Small Cap, you can compare the effects of market volatilities on Dimensional Targeted and Themes Small 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 Themes Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Targeted and Themes Small.
Diversification Opportunities for Dimensional Targeted and Themes Small
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dimensional and Themes is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Targeted Value and Themes Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Themes Small Cap 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 Themes Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Themes Small Cap has no effect on the direction of Dimensional Targeted i.e., Dimensional Targeted and Themes Small go up and down completely randomly.
Pair Corralation between Dimensional Targeted and Themes Small
Given the investment horizon of 90 days Dimensional Targeted is expected to generate 1.2 times less return on investment than Themes Small. But when comparing it to its historical volatility, Dimensional Targeted Value is 1.03 times less risky than Themes Small. It trades about 0.27 of its potential returns per unit of risk. Themes Small Cap is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 3,104 in Themes Small Cap on November 1, 2024 and sell it today you would earn a total of 175.00 from holding Themes Small Cap or generate 5.64% 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. Themes Small Cap
Performance |
| Timeline |
| Dimensional Targeted |
| Themes Small Cap |
Dimensional Targeted and Themes Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Targeted and Themes Small
The main advantage of trading using opposite Dimensional Targeted and Themes Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Targeted position performs unexpectedly, Themes Small 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 Themes Small will offset losses from the drop in Themes Small'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 |
| Themes Small vs. Dimensional ETF Trust | Themes Small vs. Vanguard Small Cap Index | Themes Small vs. First Trust Multi Manager | Themes Small 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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