Correlation Between Alpha Architect and Dimensional Targeted
Can any of the company-specific risk be diversified away by investing in both Alpha Architect 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 Alpha Architect and Dimensional Targeted into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alpha Architect International and Dimensional Targeted Value, you can compare the effects of market volatilities on Alpha Architect 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 Alpha Architect with a short position of Dimensional Targeted. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alpha Architect and Dimensional Targeted.
Diversification Opportunities for Alpha Architect and Dimensional Targeted
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Alpha and Dimensional is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Architect International and Dimensional Targeted Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Targeted and Alpha Architect 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 Alpha Architect International 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 Alpha Architect i.e., Alpha Architect and Dimensional Targeted go up and down completely randomly.
Pair Corralation between Alpha Architect and Dimensional Targeted
Given the investment horizon of 90 days Alpha Architect International is expected to under-perform the Dimensional Targeted. But the etf apears to be less risky and, when comparing its historical volatility, Alpha Architect International is 1.99 times less risky than Dimensional Targeted. The etf trades about -0.08 of its potential returns per unit of risk. The Dimensional Targeted Value is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 5,540 in Dimensional Targeted Value on August 30, 2024 and sell it today you would earn a total of 502.00 from holding Dimensional Targeted Value or generate 9.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alpha Architect International vs. Dimensional Targeted Value
Performance |
| Timeline |
| Alpha Architect Inte |
| Dimensional Targeted |
Alpha Architect and Dimensional Targeted Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alpha Architect and Dimensional Targeted
The main advantage of trading using opposite Alpha Architect and Dimensional Targeted positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alpha Architect 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.| Alpha Architect vs. Davis Select International | Alpha Architect vs. Tidal ETF Trust | Alpha Architect vs. Principal Value ETF | Alpha Architect vs. WisdomTree Emerging Markets |
| 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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