Correlation Between Dimensional ETF and Freedom Day
Can any of the company-specific risk be diversified away by investing in both Dimensional ETF and Freedom Day 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 Freedom Day 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 Freedom Day Dividend, you can compare the effects of market volatilities on Dimensional ETF and Freedom Day 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 Freedom Day. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional ETF and Freedom Day.
Diversification Opportunities for Dimensional ETF and Freedom Day
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dimensional and Freedom is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional ETF Trust and Freedom Day Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Day Dividend 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 Freedom Day. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Day Dividend has no effect on the direction of Dimensional ETF i.e., Dimensional ETF and Freedom Day go up and down completely randomly.
Pair Corralation between Dimensional ETF and Freedom Day
Given the investment horizon of 90 days Dimensional ETF Trust is expected to under-perform the Freedom Day. In addition to that, Dimensional ETF is 1.25 times more volatile than Freedom Day Dividend. It trades about -0.1 of its total potential returns per unit of risk. Freedom Day Dividend is currently generating about -0.1 per unit of volatility. If you would invest 3,312 in Freedom Day Dividend on January 19, 2025 and sell it today you would lose (189.00) from holding Freedom Day Dividend or give up 5.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional ETF Trust vs. Freedom Day Dividend
Performance |
| Timeline |
| Dimensional ETF Trust |
| Freedom Day Dividend |
Dimensional ETF and Freedom Day Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional ETF and Freedom Day
The main advantage of trading using opposite Dimensional ETF and Freedom Day positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional ETF position performs unexpectedly, Freedom Day 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 Freedom Day will offset losses from the drop in Freedom Day's long position.| Dimensional ETF vs. Davis Select International | Dimensional ETF vs. Tidal ETF Trust | Dimensional ETF vs. Principal Value ETF | Dimensional ETF vs. WisdomTree Emerging Markets |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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