Correlation Between Dimensional Core and SPDR SSGA
Can any of the company-specific risk be diversified away by investing in both Dimensional Core and SPDR SSGA 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 Core and SPDR SSGA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dimensional Core Equity and SPDR SSGA Large, you can compare the effects of market volatilities on Dimensional Core and SPDR SSGA 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 Core with a short position of SPDR SSGA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and SPDR SSGA.
Diversification Opportunities for Dimensional Core and SPDR SSGA
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dimensional and SPDR is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and SPDR SSGA Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSGA Large and Dimensional Core 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 Core Equity are associated (or correlated) with SPDR SSGA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSGA Large has no effect on the direction of Dimensional Core i.e., Dimensional Core and SPDR SSGA go up and down completely randomly.
Pair Corralation between Dimensional Core and SPDR SSGA
Given the investment horizon of 90 days Dimensional Core Equity is expected to generate 1.32 times more return on investment than SPDR SSGA. However, Dimensional Core is 1.32 times more volatile than SPDR SSGA Large. It trades about 0.11 of its potential returns per unit of risk. SPDR SSGA Large is currently generating about 0.06 per unit of risk. If you would invest 3,054 in Dimensional Core Equity on February 26, 2024 and sell it today you would earn a total of 141.00 from holding Dimensional Core Equity or generate 4.62% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Dimensional Core Equity vs. SPDR SSGA Large
Performance |
Timeline |
Dimensional Core Equity |
SPDR SSGA Large |
Dimensional Core and SPDR SSGA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Dimensional Core and SPDR SSGA
The main advantage of trading using opposite Dimensional Core and SPDR SSGA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core position performs unexpectedly, SPDR SSGA 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 SPDR SSGA will offset losses from the drop in SPDR SSGA's long position.Dimensional Core vs. RiverFront Dynamic Core | Dimensional Core vs. Hartford Multifactor Equity | Dimensional Core vs. Hartford Multifactor Emerging | Dimensional Core vs. First Trust RiverFront |
SPDR SSGA vs. RiverFront Dynamic Core | SPDR SSGA vs. Hartford Multifactor Equity | SPDR SSGA vs. Hartford Multifactor Emerging | SPDR SSGA vs. First Trust RiverFront |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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