Correlation Between Dimensional International and Vanguard International
Can any of the company-specific risk be diversified away by investing in both Dimensional International and Vanguard 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 Vanguard International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dimensional International Value and Vanguard International High, you can compare the effects of market volatilities on Dimensional International and Vanguard 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 Vanguard International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional International and Vanguard International.
Diversification Opportunities for Dimensional International and Vanguard International
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dimensional and Vanguard is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional International Valu and Vanguard International High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard 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 Value are associated (or correlated) with Vanguard International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard International has no effect on the direction of Dimensional International i.e., Dimensional International and Vanguard International go up and down completely randomly.
Pair Corralation between Dimensional International and Vanguard International
Given the investment horizon of 90 days Dimensional International Value is expected to generate 0.93 times more return on investment than Vanguard International. However, Dimensional International Value is 1.08 times less risky than Vanguard International. It trades about -0.05 of its potential returns per unit of risk. Vanguard International High is currently generating about -0.09 per unit of risk. If you would invest 3,678 in Dimensional International Value on August 26, 2024 and sell it today you would lose (32.00) from holding Dimensional International Value or give up 0.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional International Valu vs. Vanguard International High
Performance |
| Timeline |
| Dimensional International |
| Vanguard International |
Dimensional International and Vanguard International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional International and Vanguard International
The main advantage of trading using opposite Dimensional International and Vanguard International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional International position performs unexpectedly, Vanguard 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 Vanguard International will offset losses from the drop in Vanguard International's long position.The idea behind Dimensional International Value and Vanguard 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
Other Complementary Tools
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope |