Correlation Between Dimensional World and First Trust
Can any of the company-specific risk be diversified away by investing in both Dimensional World and First Trust 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 World and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dimensional World ex and First Trust, you can compare the effects of market volatilities on Dimensional World and First Trust 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 World with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional World and First Trust.
Diversification Opportunities for Dimensional World and First Trust
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dimensional and First is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional World ex and First Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust and Dimensional World 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 World ex are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust has no effect on the direction of Dimensional World i.e., Dimensional World and First Trust go up and down completely randomly.
Pair Corralation between Dimensional World and First Trust
If you would invest 2,494 in Dimensional World ex on October 24, 2024 and sell it today you would earn a total of 8.00 from holding Dimensional World ex or generate 0.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 5.56% |
| Values | Daily Returns |
Dimensional World ex vs. First Trust
Performance |
| Timeline |
| Dimensional World |
| First Trust |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Dimensional World and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional World and First Trust
The main advantage of trading using opposite Dimensional World and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional World position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Dimensional World vs. Dimensional Core Equity | Dimensional World vs. Dimensional Targeted Value | Dimensional World vs. Dimensional International Value | Dimensional World vs. Dimensional 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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