Correlation Between Dimensional Core and Dimensional Targeted
Can any of the company-specific risk be diversified away by investing in both Dimensional Core and Dimensional Targeted 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 Dimensional Targeted 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 Dimensional Targeted Value, you can compare the effects of market volatilities on Dimensional Core and Dimensional Targeted 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 Dimensional Targeted. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and Dimensional Targeted.
Diversification Opportunities for Dimensional Core and Dimensional Targeted
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dimensional and Dimensional is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and Dimensional Targeted Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Targeted 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 Dimensional Targeted. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Targeted has no effect on the direction of Dimensional Core i.e., Dimensional Core and Dimensional Targeted go up and down completely randomly.
Pair Corralation between Dimensional Core and Dimensional Targeted
Given the investment horizon of 90 days Dimensional Core is expected to generate 1.53 times less return on investment than Dimensional Targeted. But when comparing it to its historical volatility, Dimensional Core Equity is 1.83 times less risky than Dimensional Targeted. It trades about 0.18 of its potential returns per unit of risk. Dimensional Targeted Value is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 5,547 in Dimensional Targeted Value on August 28, 2024 and sell it today you would earn a total of 509.00 from holding Dimensional Targeted Value or generate 9.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Core Equity vs. Dimensional Targeted Value
Performance |
| Timeline |
| Dimensional Core Equity |
| Dimensional Targeted |
Dimensional Core and Dimensional Targeted Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Core and Dimensional Targeted
The main advantage of trading using opposite Dimensional Core and Dimensional Targeted positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core position performs unexpectedly, Dimensional Targeted 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 Targeted will offset losses from the drop in Dimensional Targeted'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 |
| Dimensional Targeted vs. Dimensional Small Cap | Dimensional Targeted vs. Dimensional Core Equity | Dimensional Targeted vs. Dimensional International Value | Dimensional Targeted vs. Dimensional Equity ETF |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
Other Complementary Tools
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets |