Correlation Between Dimensional Core and DBX ETF

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

Diversification Opportunities for Dimensional Core and DBX ETF

0.98

Correlation Coefficient

Dimensional Core  DBX ETF

Almost no diversification

The 3 months correlation between Dimensional and DBX is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and DBX ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DBX 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 DBX ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DBX ETF Trust has no effect on the direction of Dimensional Core i.e., Dimensional Core and DBX ETF go up and down completely randomly.

Pair Corralation between Dimensional Core and DBX ETF

Given the investment horizon of 90 days Dimensional Core Equity is expected to under-perform the DBX ETF. In addition to that, Dimensional Core is 1.17 times more volatile than DBX ETF Trust. It trades about -0.22 of its total potential returns per unit of risk. DBX ETF Trust is currently generating about -0.22 per unit of volatility. If you would invest  5,431  in DBX ETF Trust on October 6, 2024 and sell it today you would lose (187.00) from holding DBX ETF Trust or give up 3.44% 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.  DBX ETF Trust

Dimensional Core Equity

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Core Equity are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

DBX ETF Trust

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DBX ETF Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, DBX ETF is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Dimensional Core and DBX ETF

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

The idea behind Dimensional Core Equity and DBX 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.