Correlation Between Dimensional International and Vanguard Large
Can any of the company-specific risk be diversified away by investing in both Dimensional International and Vanguard Large 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 Large 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 Vanguard Large Cap Index, you can compare the effects of market volatilities on Dimensional International and Vanguard Large 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 Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional International and Vanguard Large.
Diversification Opportunities for Dimensional International and Vanguard Large
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Dimensional and Vanguard is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional International High and Vanguard Large Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Large Cap 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 Vanguard Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Large Cap has no effect on the direction of Dimensional International i.e., Dimensional International and Vanguard Large go up and down completely randomly.
Pair Corralation between Dimensional International and Vanguard Large
Given the investment horizon of 90 days Dimensional International High is expected to generate 0.8 times more return on investment than Vanguard Large. However, Dimensional International High is 1.24 times less risky than Vanguard Large. It trades about 0.28 of its potential returns per unit of risk. Vanguard Large Cap Index is currently generating about 0.13 per unit of risk. If you would invest 2,532 in Dimensional International High on November 4, 2024 and sell it today you would earn a total of 99.00 from holding Dimensional International High or generate 3.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional International High vs. Vanguard Large Cap Index
Performance |
| Timeline |
| Dimensional International |
| Vanguard Large Cap |
Dimensional International and Vanguard Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional International and Vanguard Large
The main advantage of trading using opposite Dimensional International and Vanguard Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional International position performs unexpectedly, Vanguard Large 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 Large will offset losses from the drop in Vanguard Large's long position.The idea behind Dimensional International High and Vanguard Large Cap Index 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.
| Vanguard Large vs. Vanguard Mid Cap Index | Vanguard Large vs. Vanguard Small Cap Index | Vanguard Large vs. Vanguard Extended Market | Vanguard Large vs. Vanguard Small Cap Growth |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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