Correlation Between Dimensional Core and Impact Shares

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

Diversification Opportunities for Dimensional Core and Impact Shares

0.78

Correlation Coefficient

Dimensional Core  Impact Shares

Poor diversification

The 3 months correlation between Dimensional and Impact is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and Impact Shares YWCA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Impact Shares YWCA 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 Impact Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Impact Shares YWCA has no effect on the direction of Dimensional Core i.e., Dimensional Core and Impact Shares go up and down completely randomly.

Pair Corralation between Dimensional Core and Impact Shares

Given the investment horizon of 90 days Dimensional Core Equity is expected to under-perform the Impact Shares. In addition to that, Dimensional Core is 1.16 times more volatile than Impact Shares YWCA. It trades about -0.08 of its total potential returns per unit of risk. Impact Shares YWCA is currently generating about -0.02 per unit of volatility. If you would invest  3,891  in Impact Shares YWCA on December 21, 2024 and sell it today you would lose (48.00) from holding Impact Shares YWCA or give up 1.23% of portfolio value over 90 days.

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

Dimensional Core Equity  vs.  Impact Shares YWCA

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.

Impact Shares YWCA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Impact Shares YWCA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Impact Shares is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Dimensional Core and Impact Shares

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

The idea behind Dimensional Core Equity and Impact Shares YWCA 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.