Correlation Between Dimensional Targeted and Dimensional ETF

Can any of the company-specific risk be diversified away by investing in both Dimensional Targeted 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 Dimensional Targeted and Dimensional ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dimensional Targeted Value and Dimensional ETF Trust, you can compare the effects of market volatilities on Dimensional Targeted 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 Dimensional Targeted with a short position of Dimensional ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Targeted and Dimensional ETF.

Diversification Opportunities for Dimensional Targeted and Dimensional ETF

0.87

Correlation Coefficient

Dimensional Targeted  Dimensional ETF

Very poor diversification

The 3 months correlation between Dimensional and Dimensional is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Targeted Value 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 Dimensional Targeted 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 Targeted Value 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 Dimensional Targeted i.e., Dimensional Targeted and Dimensional ETF go up and down completely randomly.

Pair Corralation between Dimensional Targeted and Dimensional ETF

Given the investment horizon of 90 days Dimensional Targeted Value is expected to under-perform the Dimensional ETF. But the etf apears to be less risky and, when comparing its historical volatility, Dimensional Targeted Value is 1.1 times less risky than Dimensional ETF. The etf trades about -0.15 of its potential returns per unit of risk. The Dimensional ETF Trust is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  2,927  in Dimensional ETF Trust on March 29, 2024 and sell it today you would lose (81.00) from holding Dimensional ETF Trust or give up 2.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Dimensional Targeted Value  vs.  Dimensional ETF Trust

Dimensional Targeted

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dimensional Targeted Value has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Dimensional Targeted is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Dimensional ETF Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dimensional ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Dimensional ETF is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Dimensional Targeted and Dimensional ETF

The main advantage of trading using opposite Dimensional Targeted and Dimensional ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Targeted 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.

The idea behind Dimensional Targeted Value and Dimensional ETF Trust pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.