Correlation Between Dimensional Core and Innovator Capital

Can any of the company-specific risk be diversified away by investing in both Dimensional Core and Innovator Capital 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 Innovator Capital 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 Innovator Capital Management, you can compare the effects of market volatilities on Dimensional Core and Innovator Capital 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 Innovator Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and Innovator Capital.

Diversification Opportunities for Dimensional Core and Innovator Capital

0.81

Correlation Coefficient

Dimensional Core  Innovator Capital

Very poor diversification

The 3 months correlation between Dimensional and Innovator is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and Innovator Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Capital 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 Innovator Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Capital has no effect on the direction of Dimensional Core i.e., Dimensional Core and Innovator Capital go up and down completely randomly.

Pair Corralation between Dimensional Core and Innovator Capital

If you would invest  3,396  in Dimensional Core Equity on September 20, 2024 and sell it today you would earn a total of  50.00  from holding Dimensional Core Equity or generate 1.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	1.56%
Values	Daily Returns

Dimensional Core Equity  vs.  Innovator Capital Management

Dimensional Core Equity

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Core Equity are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Dimensional Core is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Innovator Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innovator Capital Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Innovator Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Dimensional Core and Innovator Capital

The main advantage of trading using opposite Dimensional Core and Innovator Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core position performs unexpectedly, Innovator Capital 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 Innovator Capital will offset losses from the drop in Innovator Capital's long position.

The idea behind Dimensional Core Equity and Innovator Capital Management 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.