Correlation Between Dimensional Core and Nuveen Dividend

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

Diversification Opportunities for Dimensional Core and Nuveen Dividend

0.94

Correlation Coefficient

Dimensional Core  Nuveen Dividend

Almost no diversification

The 3 months correlation between Dimensional and Nuveen is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and Nuveen Dividend Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Dividend Growth 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 Nuveen Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Dividend Growth has no effect on the direction of Dimensional Core i.e., Dimensional Core and Nuveen Dividend go up and down completely randomly.

Pair Corralation between Dimensional Core and Nuveen Dividend

Given the investment horizon of 90 days Dimensional Core Equity is expected to under-perform the Nuveen Dividend. In addition to that, Dimensional Core is 1.2 times more volatile than Nuveen Dividend Growth. It trades about -0.08 of its total potential returns per unit of risk. Nuveen Dividend Growth is currently generating about -0.06 per unit of volatility. If you would invest  3,290  in Nuveen Dividend Growth on December 22, 2024 and sell it today you would lose (96.00) from holding Nuveen Dividend Growth or give up 2.92% 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.  Nuveen Dividend Growth

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.

Nuveen Dividend Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nuveen Dividend Growth has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Nuveen Dividend is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Dimensional Core and Nuveen Dividend

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

The idea behind Dimensional Core Equity and Nuveen Dividend Growth 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.