Correlation Between Dimensional ETF and Dimensional Targeted
Can any of the company-specific risk be diversified away by investing in both Dimensional ETF and Dimensional Targeted 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 Targeted 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 Targeted Value, you can compare the effects of market volatilities on Dimensional ETF and Dimensional Targeted 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 Targeted. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional ETF and Dimensional Targeted.
Diversification Opportunities for Dimensional ETF and Dimensional Targeted
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dimensional and Dimensional is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional ETF Trust and Dimensional Targeted Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Targeted 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 Targeted. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Targeted has no effect on the direction of Dimensional ETF i.e., Dimensional ETF and Dimensional Targeted go up and down completely randomly.
Pair Corralation between Dimensional ETF and Dimensional Targeted
Given the investment horizon of 90 days Dimensional ETF Trust is expected to generate 0.57 times more return on investment than Dimensional Targeted. However, Dimensional ETF Trust is 1.75 times less risky than Dimensional Targeted. It trades about 0.15 of its potential returns per unit of risk. Dimensional Targeted Value is currently generating about 0.08 per unit of risk. If you would invest 2,715 in Dimensional ETF Trust on August 27, 2024 and sell it today you would earn a total of 803.00 from holding Dimensional ETF Trust or generate 29.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional ETF Trust vs. Dimensional Targeted Value
Performance |
| Timeline |
| Dimensional ETF Trust |
| Dimensional Targeted |
Dimensional ETF and Dimensional Targeted Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional ETF and Dimensional Targeted
The main advantage of trading using opposite Dimensional ETF and Dimensional Targeted positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional ETF position performs unexpectedly, Dimensional Targeted 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 Targeted will offset losses from the drop in Dimensional Targeted's long position.| Dimensional ETF vs. Dimensional International High | Dimensional ETF vs. Dimensional Core Equity | Dimensional ETF vs. Dimensional ETF Trust | Dimensional ETF vs. Dimensional International Core |
| Dimensional Targeted vs. Dimensional Small Cap | Dimensional Targeted vs. Dimensional Core Equity | Dimensional Targeted vs. Dimensional International Value | Dimensional Targeted vs. Dimensional Equity ETF |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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