Correlation Between Dimensional International and Dimensional Core
Can any of the company-specific risk be diversified away by investing in both Dimensional International and Dimensional Core 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 International and Dimensional Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dimensional International Core and Dimensional Core Equity, you can compare the effects of market volatilities on Dimensional International and Dimensional Core 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 International with a short position of Dimensional Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional International and Dimensional Core.
Diversification Opportunities for Dimensional International and Dimensional Core
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Dimensional and Dimensional is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional International Core and Dimensional Core Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Core Equity and Dimensional International 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 International Core are associated (or correlated) with Dimensional Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Core Equity has no effect on the direction of Dimensional International i.e., Dimensional International and Dimensional Core go up and down completely randomly.
Pair Corralation between Dimensional International and Dimensional Core
Given the investment horizon of 90 days Dimensional International is expected to generate 1.05 times less return on investment than Dimensional Core. But when comparing it to its historical volatility, Dimensional International Core is 1.45 times less risky than Dimensional Core. It trades about 0.14 of its potential returns per unit of risk. Dimensional Core Equity is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 3,498 in Dimensional Core Equity on October 23, 2024 and sell it today you would earn a total of 49.00 from holding Dimensional Core Equity or generate 1.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional International Core vs. Dimensional Core Equity
Performance |
| Timeline |
| Dimensional International |
| Dimensional Core Equity |
Dimensional International and Dimensional Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional International and Dimensional Core
The main advantage of trading using opposite Dimensional International and Dimensional Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional International position performs unexpectedly, Dimensional Core 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 Core will offset losses from the drop in Dimensional Core's long position.The idea behind Dimensional International Core and Dimensional Core Equity pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Dimensional Core vs. Dimensional Targeted Value | Dimensional Core vs. Dimensional World ex | Dimensional Core vs. Dimensional Small Cap | Dimensional Core vs. Dimensional Core Equity |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
Other Complementary Tools
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Stocks Directory Find actively traded stocks across global markets | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas |