Correlation Between Dimensional Core and SPDR MSCI
Can any of the company-specific risk be diversified away by investing in both Dimensional Core and SPDR MSCI 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 Core and SPDR MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dimensional Core Equity and SPDR MSCI ACWI, you can compare the effects of market volatilities on Dimensional Core and SPDR MSCI 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 Core with a short position of SPDR MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and SPDR MSCI.
Diversification Opportunities for Dimensional Core and SPDR MSCI
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dimensional and SPDR is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and SPDR MSCI ACWI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI ACWI and Dimensional Core 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 Core Equity are associated (or correlated) with SPDR MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI ACWI has no effect on the direction of Dimensional Core i.e., Dimensional Core and SPDR MSCI go up and down completely randomly.
Pair Corralation between Dimensional Core and SPDR MSCI
Given the investment horizon of 90 days Dimensional Core Equity is expected to generate 0.94 times more return on investment than SPDR MSCI. However, Dimensional Core Equity is 1.06 times less risky than SPDR MSCI. It trades about 0.13 of its potential returns per unit of risk. SPDR MSCI ACWI is currently generating about 0.05 per unit of risk. If you would invest 2,948 in Dimensional Core Equity on August 31, 2024 and sell it today you would earn a total of 1,257 from holding Dimensional Core Equity or generate 42.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Core Equity vs. SPDR MSCI ACWI
Performance |
| Timeline |
| Dimensional Core Equity |
| SPDR MSCI ACWI |
Dimensional Core and SPDR MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Core and SPDR MSCI
The main advantage of trading using opposite Dimensional Core and SPDR MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core position performs unexpectedly, SPDR MSCI 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 MSCI will offset losses from the drop in SPDR MSCI's long position.| Dimensional Core vs. Dimensional International Core | Dimensional Core vs. Dimensional Emerging Core | Dimensional Core vs. Dimensional Core Equity | Dimensional Core vs. Dimensional Small Cap |
| SPDR MSCI vs. SPDR SP International | SPDR MSCI vs. SPDR SP Emerging | SPDR MSCI vs. SPDR Global Dow | SPDR MSCI vs. SPDR SP Global |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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