Correlation Between Dimensional Core and Dimensional ETF

Can any of the company-specific risk be diversified away by investing in both Dimensional Core 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 Core 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 Core Equity and Dimensional ETF Trust, you can compare the effects of market volatilities on Dimensional Core 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 Core with a short position of Dimensional ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and Dimensional ETF.

Diversification Opportunities for Dimensional Core and Dimensional ETF

0.44

Correlation Coefficient

Dimensional Core  Dimensional ETF

Very weak diversification

The 3 months correlation between Dimensional and Dimensional is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity 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 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 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 Core i.e., Dimensional Core and Dimensional ETF go up and down completely randomly.

Pair Corralation between Dimensional Core and Dimensional ETF

Given the investment horizon of 90 days Dimensional Core Equity is expected to under-perform the Dimensional ETF. In addition to that, Dimensional Core is 1.02 times more volatile than Dimensional ETF Trust. It trades about -0.13 of its total potential returns per unit of risk. Dimensional ETF Trust is currently generating about -0.04 per unit of volatility. If you would invest  2,687  in Dimensional ETF Trust on December 5, 2024 and sell it today you would lose (58.00) from holding Dimensional ETF Trust or give up 2.16% of portfolio value over 90 days.

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

Dimensional Core Equity  vs.  Dimensional ETF Trust

Dimensional Core Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dimensional Core Equity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Dimensional ETF Trust

Risk-Adjusted Performance

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 very healthy technical and fundamental indicators, Dimensional ETF is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Dimensional Core and Dimensional ETF

The main advantage of trading using opposite Dimensional Core and Dimensional ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core 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 Core Equity 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.