Correlation Between Dimensional Core and T Rowe

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

Diversification Opportunities for Dimensional Core and T Rowe

0.7

Correlation Coefficient

Dimensional Core  T Rowe

Poor diversification

The 3 months correlation between Dimensional and TDVG is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and T Rowe Price in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Rowe Price 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 T Rowe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Rowe Price has no effect on the direction of Dimensional Core i.e., Dimensional Core and T Rowe go up and down completely randomly.

Pair Corralation between Dimensional Core and T Rowe

Given the investment horizon of 90 days Dimensional Core Equity is expected to generate 1.32 times more return on investment than T Rowe. However, Dimensional Core is 1.32 times more volatile than T Rowe Price. It trades about 0.15 of its potential returns per unit of risk. T Rowe Price is currently generating about 0.02 per unit of risk. If you would invest  3,350  in Dimensional Core Equity on September 16, 2024 and sell it today you would earn a total of  239.00  from holding Dimensional Core Equity or generate 7.13% return on investment over 90 days.

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

Dimensional Core Equity  vs.  T Rowe Price

Dimensional Core Equity

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Core Equity are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Dimensional Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

T Rowe Price

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in T Rowe Price are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, T Rowe is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Dimensional Core and T Rowe

The main advantage of trading using opposite Dimensional Core and T Rowe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core position performs unexpectedly, T Rowe 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 T Rowe will offset losses from the drop in T Rowe's long position.

The idea behind Dimensional Core Equity and T Rowe Price 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.