Correlation Between Dimensional International and Dimensional International
Can any of the company-specific risk be diversified away by investing in both Dimensional International and Dimensional International 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 International 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 International High, you can compare the effects of market volatilities on Dimensional International and Dimensional International 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 International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional International and Dimensional International.
Diversification Opportunities for Dimensional International and Dimensional International
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Dimensional and Dimensional is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional International Core and Dimensional International High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional International 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 International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional International has no effect on the direction of Dimensional International i.e., Dimensional International and Dimensional International go up and down completely randomly.
Pair Corralation between Dimensional International and Dimensional International
Given the investment horizon of 90 days Dimensional International is expected to generate 1.08 times less return on investment than Dimensional International. But when comparing it to its historical volatility, Dimensional International Core is 1.02 times less risky than Dimensional International. It trades about 0.37 of its potential returns per unit of risk. Dimensional International High is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest 2,560 in Dimensional International High on November 18, 2024 and sell it today you would earn a total of 165.00 from holding Dimensional International High or generate 6.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional International Core vs. Dimensional International High
Performance |
| Timeline |
| Dimensional International |
| Dimensional International |
Dimensional International and Dimensional International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional International and Dimensional International
The main advantage of trading using opposite Dimensional International and Dimensional International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional International position performs unexpectedly, Dimensional International 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 International will offset losses from the drop in Dimensional International's long position.The idea behind Dimensional International Core and Dimensional International High 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.
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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