Correlation Between Dimensional Targeted and ETF Series

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

Diversification Opportunities for Dimensional Targeted and ETF Series

0.96

Correlation Coefficient

Dimensional Targeted  ETF Series

Almost no diversification

The 3 months correlation between Dimensional and ETF is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Targeted Value and ETF Series Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETF Series Solutions 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 ETF Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETF Series Solutions has no effect on the direction of Dimensional Targeted i.e., Dimensional Targeted and ETF Series go up and down completely randomly.

Pair Corralation between Dimensional Targeted and ETF Series

Given the investment horizon of 90 days Dimensional Targeted Value is expected to generate 1.19 times more return on investment than ETF Series. However, Dimensional Targeted is 1.19 times more volatile than ETF Series Solutions. It trades about 0.15 of its potential returns per unit of risk. ETF Series Solutions is currently generating about 0.15 per unit of risk. If you would invest  5,414  in Dimensional Targeted Value on September 1, 2024 and sell it today you would earn a total of  651.00  from holding Dimensional Targeted Value or generate 12.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Dimensional Targeted Value  vs.  ETF Series Solutions

Dimensional Targeted

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Targeted Value are ranked lower than 11 (%) 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.

ETF Series Solutions

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ETF Series Solutions are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting primary indicators, ETF Series may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Dimensional Targeted and ETF Series

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

The idea behind Dimensional Targeted Value and ETF Series Solutions 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.