Correlation Between Vanguard and Dimensional ETF
Can any of the company-specific risk be diversified away by investing in both Vanguard and Dimensional ETF 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 and Dimensional ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard SP Small Cap and Dimensional ETF Trust, you can compare the effects of market volatilities on Vanguard and Dimensional ETF 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 with a short position of Dimensional ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and Dimensional ETF.
Diversification Opportunities for Vanguard and Dimensional ETF
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vanguard and Dimensional is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP Small Cap and Dimensional ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional ETF Trust and Vanguard 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 SP Small Cap are associated (or correlated) with Dimensional ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional ETF Trust has no effect on the direction of Vanguard i.e., Vanguard and Dimensional ETF go up and down completely randomly.
Pair Corralation between Vanguard and Dimensional ETF
Given the investment horizon of 90 days Vanguard SP Small Cap is expected to generate 1.35 times more return on investment than Dimensional ETF. However, Vanguard is 1.35 times more volatile than Dimensional ETF Trust. It trades about 0.05 of its potential returns per unit of risk. Dimensional ETF Trust is currently generating about 0.06 per unit of risk. If you would invest 9,562 in Vanguard SP Small Cap on November 5, 2024 and sell it today you would earn a total of 1,340 from holding Vanguard SP Small Cap or generate 14.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard SP Small Cap vs. Dimensional ETF Trust
Performance |
| Timeline |
| Vanguard SP Small |
| Dimensional ETF Trust |
Vanguard and Dimensional ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard and Dimensional ETF
The main advantage of trading using opposite Vanguard and Dimensional ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard position performs unexpectedly, Dimensional ETF 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 ETF will offset losses from the drop in Dimensional ETF's long position.| Vanguard vs. Vanguard SP Mid Cap | Vanguard vs. Vanguard SP Small Cap | Vanguard vs. Vanguard SP Small Cap | Vanguard vs. Vanguard Russell 2000 |
| Dimensional ETF vs. Dimensional ETF Trust | Dimensional ETF vs. Dimensional ETF Trust | Dimensional ETF vs. Dimensional International Value | Dimensional ETF vs. Dimensional Targeted Value |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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