Correlation Between Davis Select and Dimensional Core
Can any of the company-specific risk be diversified away by investing in both Davis Select and Dimensional Core 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 Davis Select and Dimensional Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Davis Select International and Dimensional Core Equity, you can compare the effects of market volatilities on Davis Select and Dimensional Core 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 Davis Select with a short position of Dimensional Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davis Select and Dimensional Core.
Diversification Opportunities for Davis Select and Dimensional Core
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Davis and Dimensional is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Davis Select International and Dimensional Core Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Core Equity and Davis Select 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 Davis Select International are associated (or correlated) with Dimensional Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Core Equity has no effect on the direction of Davis Select i.e., Davis Select and Dimensional Core go up and down completely randomly.
Pair Corralation between Davis Select and Dimensional Core
Given the investment horizon of 90 days Davis Select is expected to generate 1.09 times less return on investment than Dimensional Core. In addition to that, Davis Select is 1.74 times more volatile than Dimensional Core Equity. It trades about 0.07 of its total potential returns per unit of risk. Dimensional Core Equity is currently generating about 0.14 per unit of volatility. If you would invest 3,641 in Dimensional Core Equity on August 31, 2024 and sell it today you would earn a total of 564.00 from holding Dimensional Core Equity or generate 15.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Davis Select International vs. Dimensional Core Equity
Performance |
| Timeline |
| Davis Select Interna |
| Dimensional Core Equity |
Davis Select and Dimensional Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Davis Select and Dimensional Core
The main advantage of trading using opposite Davis Select and Dimensional Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Davis Select position performs unexpectedly, Dimensional Core 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 Core will offset losses from the drop in Dimensional Core's long position.| Davis Select vs. iShares ESG Aggregate | Davis Select vs. SPDR MSCI Emerging | Davis Select vs. Aquagold International | Davis Select vs. Thrivent High Yield |
| Dimensional Core vs. Dimensional International Core | Dimensional Core vs. Dimensional Emerging Core | Dimensional Core vs. Dimensional Core Equity | Dimensional Core 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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