Correlation Between Dimensional Core and Wahed FTSE

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

Diversification Opportunities for Dimensional Core and Wahed FTSE

0.81

Correlation Coefficient

Dimensional Core  Wahed FTSE

Very poor diversification

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

Pair Corralation between Dimensional Core and Wahed FTSE

Given the investment horizon of 90 days Dimensional Core Equity is expected to generate 0.94 times more return on investment than Wahed FTSE. However, Dimensional Core Equity is 1.07 times less risky than Wahed FTSE. It trades about -0.08 of its potential returns per unit of risk. Wahed FTSE USA is currently generating about -0.13 per unit of risk. If you would invest  3,456  in Dimensional Core Equity on December 30, 2024 and sell it today you would lose (176.00) from holding Dimensional Core Equity or give up 5.09% of portfolio value over 90 days.

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

Dimensional Core Equity  vs.  Wahed FTSE USA

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 rather sound basic indicators, Dimensional Core is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Wahed FTSE USA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wahed FTSE USA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Etf's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the ETF venture institutional investors.

Pair Trading with Dimensional Core and Wahed FTSE

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

The idea behind Dimensional Core Equity and Wahed FTSE USA 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..