Correlation Between Dimensional International and ETF Series
Can any of the company-specific risk be diversified away by investing in both Dimensional International and ETF Series 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 ETF Series into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dimensional International High and ETF Series Solutions, you can compare the effects of market volatilities on Dimensional International and ETF Series 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 ETF Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional International and ETF Series.
Diversification Opportunities for Dimensional International and ETF Series
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dimensional and ETF is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional International High and ETF Series Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETF Series Solutions 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 High are associated (or correlated) with ETF Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETF Series Solutions has no effect on the direction of Dimensional International i.e., Dimensional International and ETF Series go up and down completely randomly.
Pair Corralation between Dimensional International and ETF Series
Given the investment horizon of 90 days Dimensional International is expected to generate 1.25 times less return on investment than ETF Series. In addition to that, Dimensional International is 1.12 times more volatile than ETF Series Solutions. It trades about 0.03 of its total potential returns per unit of risk. ETF Series Solutions is currently generating about 0.05 per unit of volatility. If you would invest 2,390 in ETF Series Solutions on January 10, 2025 and sell it today you would earn a total of 349.00 from holding ETF Series Solutions or generate 14.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.63% |
| Values | Daily Returns |
Dimensional International High vs. ETF Series Solutions
Performance |
| Timeline |
| Dimensional International |
| ETF Series Solutions |
Dimensional International and ETF Series Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional International and ETF Series
The main advantage of trading using opposite Dimensional International and ETF Series positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional International position performs unexpectedly, ETF Series 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 ETF Series will offset losses from the drop in ETF Series' long position.The idea behind Dimensional International High and ETF Series Solutions 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.
| ETF Series vs. Nuveen ESG Large Cap | ETF Series vs. Nuveen ESG Small Cap | ETF Series vs. Nuveen ESG Mid Cap | ETF Series vs. Nuveen ESG Mid 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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