Correlation Between Dimensional Marketwide and Global X
Can any of the company-specific risk be diversified away by investing in both Dimensional Marketwide and Global X 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 Marketwide and Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dimensional Marketwide Value and Global X MSCI, you can compare the effects of market volatilities on Dimensional Marketwide and Global X 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 Marketwide with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Marketwide and Global X.
Diversification Opportunities for Dimensional Marketwide and Global X
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dimensional and Global is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Marketwide Value and Global X MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X MSCI and Dimensional Marketwide 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 Marketwide Value are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X MSCI has no effect on the direction of Dimensional Marketwide i.e., Dimensional Marketwide and Global X go up and down completely randomly.
Pair Corralation between Dimensional Marketwide and Global X
Given the investment horizon of 90 days Dimensional Marketwide Value is expected to generate 1.0 times more return on investment than Global X. However, Dimensional Marketwide Value is 1.0 times less risky than Global X. It trades about 0.13 of its potential returns per unit of risk. Global X MSCI is currently generating about 0.06 per unit of risk. If you would invest 3,399 in Dimensional Marketwide Value on August 24, 2024 and sell it today you would earn a total of 961.00 from holding Dimensional Marketwide Value or generate 28.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Marketwide Value vs. Global X MSCI
Performance |
| Timeline |
| Dimensional Marketwide |
| Global X MSCI |
Dimensional Marketwide and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Marketwide and Global X
The main advantage of trading using opposite Dimensional Marketwide and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Marketwide position performs unexpectedly, Global X 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 Global X will offset losses from the drop in Global X's long position.The idea behind Dimensional Marketwide Value and Global X MSCI 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.
| Global X vs. Dimensional Targeted Value | Global X vs. Dimensional Small Cap | Global X vs. Dimensional Marketwide Value | Global X 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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