Correlation Between Dimensional ETF and SPDR Portfolio
Can any of the company-specific risk be diversified away by investing in both Dimensional ETF and SPDR Portfolio 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 ETF and SPDR Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dimensional ETF Trust and SPDR Portfolio TIPS, you can compare the effects of market volatilities on Dimensional ETF and SPDR Portfolio 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 ETF with a short position of SPDR Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional ETF and SPDR Portfolio.
Diversification Opportunities for Dimensional ETF and SPDR Portfolio
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Dimensional and SPDR is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional ETF Trust and SPDR Portfolio TIPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio TIPS and Dimensional ETF 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 ETF Trust are associated (or correlated) with SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio TIPS has no effect on the direction of Dimensional ETF i.e., Dimensional ETF and SPDR Portfolio go up and down completely randomly.
Pair Corralation between Dimensional ETF and SPDR Portfolio
Given the investment horizon of 90 days Dimensional ETF is expected to generate 1.66 times less return on investment than SPDR Portfolio. But when comparing it to its historical volatility, Dimensional ETF Trust is 1.06 times less risky than SPDR Portfolio. It trades about 0.04 of its potential returns per unit of risk. SPDR Portfolio TIPS is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,566 in SPDR Portfolio TIPS on August 28, 2024 and sell it today you would earn a total of 11.00 from holding SPDR Portfolio TIPS or generate 0.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dimensional ETF Trust vs. SPDR Portfolio TIPS
Performance |
| Timeline |
| Dimensional ETF Trust |
| SPDR Portfolio TIPS |
Dimensional ETF and SPDR Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional ETF and SPDR Portfolio
The main advantage of trading using opposite Dimensional ETF and SPDR Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional ETF position performs unexpectedly, SPDR Portfolio 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 Portfolio will offset losses from the drop in SPDR Portfolio's long position.| Dimensional ETF vs. Dimensional ETF Trust | Dimensional ETF vs. Dimensional ETF Trust | Dimensional ETF vs. Dimensional ETF Trust | Dimensional ETF vs. Dimensional Core Equity |
| SPDR Portfolio vs. SPDR Bloomberg 1 10 | SPDR Portfolio vs. iShares 0 5 Year | SPDR Portfolio vs. Schwab TIPS ETF | SPDR Portfolio vs. PIMCO 15 Year |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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