Correlation Between Dimensional Targeted and Pacer Small

Can any of the company-specific risk be diversified away by investing in both Dimensional Targeted and Pacer Small 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 Targeted and Pacer Small into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dimensional Targeted Value and Pacer Small Cap, you can compare the effects of market volatilities on Dimensional Targeted and Pacer Small 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 Targeted with a short position of Pacer Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Targeted and Pacer Small.

Diversification Opportunities for Dimensional Targeted and Pacer Small

0.88

Correlation Coefficient

Dimensional Targeted  Pacer Small

Very poor diversification

The 3 months correlation between Dimensional and Pacer is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Targeted Value and Pacer Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Small Cap and Dimensional Targeted 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 Targeted Value are associated (or correlated) with Pacer Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Small Cap has no effect on the direction of Dimensional Targeted i.e., Dimensional Targeted and Pacer Small go up and down completely randomly.

Pair Corralation between Dimensional Targeted and Pacer Small

Given the investment horizon of 90 days Dimensional Targeted Value is expected to generate 0.97 times more return on investment than Pacer Small. However, Dimensional Targeted Value is 1.03 times less risky than Pacer Small. It trades about 0.1 of its potential returns per unit of risk. Pacer Small Cap is currently generating about 0.05 per unit of risk. If you would invest  5,560  in Dimensional Targeted Value on August 30, 2024 and sell it today you would earn a total of  482.00  from holding Dimensional Targeted Value or generate 8.67% return on investment over 90 days.

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

Dimensional Targeted Value  vs.  Pacer Small Cap

Dimensional Targeted

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Targeted Value are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Dimensional Targeted may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pacer Small Cap

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Small Cap are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Pacer Small 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 Targeted and Pacer Small

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

The idea behind Dimensional Targeted Value and Pacer Small Cap 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.