Correlation Between Dimensional ETF and Dimensional World
Can any of the company-specific risk be diversified away by investing in both Dimensional ETF and Dimensional World 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 Dimensional World 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 Dimensional World ex, you can compare the effects of market volatilities on Dimensional ETF and Dimensional World 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 Dimensional World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional ETF and Dimensional World.
Diversification Opportunities for Dimensional ETF and Dimensional World
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dimensional and Dimensional is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional ETF Trust and Dimensional World ex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional World 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 Dimensional World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional World has no effect on the direction of Dimensional ETF i.e., Dimensional ETF and Dimensional World go up and down completely randomly.
Pair Corralation between Dimensional ETF and Dimensional World
Given the investment horizon of 90 days Dimensional ETF is expected to generate 2.21 times less return on investment than Dimensional World. But when comparing it to its historical volatility, Dimensional ETF Trust is 6.89 times less risky than Dimensional World. It trades about 0.19 of its potential returns per unit of risk. Dimensional World ex is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,277 in Dimensional World ex on August 26, 2024 and sell it today you would earn a total of 272.00 from holding Dimensional World ex or generate 11.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional ETF Trust vs. Dimensional World ex
Performance |
| Timeline |
| Dimensional ETF Trust |
| Dimensional World |
Dimensional ETF and Dimensional World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional ETF and Dimensional World
The main advantage of trading using opposite Dimensional ETF and Dimensional World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional ETF position performs unexpectedly, Dimensional World 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 World will offset losses from the drop in Dimensional World's long position.| Dimensional ETF vs. Dimensional ETF Trust | Dimensional ETF vs. Dimensional ETF Trust | Dimensional ETF vs. Dimensional Core Equity | Dimensional ETF vs. Dimensional ETF Trust |
| 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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