Correlation Between Dimensional Core and Invesco PureBeta

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

Diversification Opportunities for Dimensional Core and Invesco PureBeta

0.97

Correlation Coefficient

Dimensional Core  Invesco PureBeta

Almost no diversification

The 3 months correlation between Dimensional and Invesco is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and Invesco PureBeta MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco PureBeta MSCI 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 Invesco PureBeta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco PureBeta MSCI has no effect on the direction of Dimensional Core i.e., Dimensional Core and Invesco PureBeta go up and down completely randomly.

Pair Corralation between Dimensional Core and Invesco PureBeta

Given the investment horizon of 90 days Dimensional Core is expected to generate 1.09 times less return on investment than Invesco PureBeta. In addition to that, Dimensional Core is 1.08 times more volatile than Invesco PureBeta MSCI. It trades about 0.16 of its total potential returns per unit of risk. Invesco PureBeta MSCI is currently generating about 0.19 per unit of volatility. If you would invest  5,612  in Invesco PureBeta MSCI on September 15, 2024 and sell it today you would earn a total of  469.00  from holding Invesco PureBeta MSCI or generate 8.36% return on investment over 90 days.

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

Dimensional Core Equity  vs.  Invesco PureBeta MSCI

Dimensional Core Equity

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Core Equity are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Dimensional Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Invesco PureBeta MSCI

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco PureBeta MSCI are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Invesco PureBeta may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dimensional Core and Invesco PureBeta

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

The idea behind Dimensional Core Equity and Invesco PureBeta MSCI 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.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.