Correlation Between Dimensional Core and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Dimensional Core and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Dimensional Core and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and Dow Jones.
Diversification Opportunities for Dimensional Core and Dow Jones
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dimensional and Dow is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Dimensional Core i.e., Dimensional Core and Dow Jones go up and down completely randomly.
Pair Corralation between Dimensional Core and Dow Jones
Given the investment horizon of 90 days Dimensional Core Equity is expected to generate 1.11 times more return on investment than Dow Jones. However, Dimensional Core is 1.11 times more volatile than Dow Jones Industrial. It trades about -0.24 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about -0.3 per unit of risk. If you would invest 3,620 in Dimensional Core Equity on September 24, 2024 and sell it today you would lose (138.00) from holding Dimensional Core Equity or give up 3.81% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Dimensional Core Equity vs. Dow Jones Industrial
Performance |
Timeline |
Dimensional Core and Dow Jones Volatility Contrast
Predicted Return Density |
Returns |
Dimensional Core Equity
Pair trading matchups for Dimensional Core
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Dimensional Core and Dow Jones
The main advantage of trading using opposite Dimensional Core and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.Dimensional Core vs. Dimensional Targeted Value | Dimensional Core vs. Dimensional World ex | Dimensional Core vs. Dimensional Small Cap | Dimensional Core vs. Dimensional Core Equity |
Dow Jones vs. Teleflex Incorporated | Dow Jones vs. Sonida Senior Living | Dow Jones vs. Avadel Pharmaceuticals PLC | Dow Jones vs. Cardinal Health |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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