Correlation Between Vanguard FTSE and Dimensional Core
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE 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 Vanguard FTSE and Dimensional Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard FTSE Developed and Dimensional Core Equity, you can compare the effects of market volatilities on Vanguard FTSE 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 Vanguard FTSE with a short position of Dimensional Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and Dimensional Core.
Diversification Opportunities for Vanguard FTSE and Dimensional Core
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vanguard and Dimensional is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed 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 Vanguard FTSE 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 Vanguard FTSE Developed 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 Vanguard FTSE i.e., Vanguard FTSE and Dimensional Core go up and down completely randomly.
Pair Corralation between Vanguard FTSE and Dimensional Core
Considering the 90-day investment horizon Vanguard FTSE Developed is expected to under-perform the Dimensional Core. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard FTSE Developed is 1.22 times less risky than Dimensional Core. The etf trades about -0.14 of its potential returns per unit of risk. The Dimensional Core Equity is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 4,016 in Dimensional Core Equity on August 28, 2024 and sell it today you would earn a total of 161.00 from holding Dimensional Core Equity or generate 4.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard FTSE Developed vs. Dimensional Core Equity
Performance |
| Timeline |
| Vanguard FTSE Developed |
| Dimensional Core Equity |
Vanguard FTSE and Dimensional Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and Dimensional Core
The main advantage of trading using opposite Vanguard FTSE and Dimensional Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE 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.| Vanguard FTSE vs. Vanguard FTSE Emerging | Vanguard FTSE vs. Vanguard Small Cap Index | Vanguard FTSE vs. Vanguard Value Index | Vanguard FTSE vs. Vanguard Small Cap Value |
| 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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