Correlation Between Dimensional Targeted and SPDR SP

Can any of the company-specific risk be diversified away by investing in both Dimensional Targeted and SPDR SP 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 SPDR SP 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 SPDR SP 600, you can compare the effects of market volatilities on Dimensional Targeted and SPDR SP 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 SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Targeted and SPDR SP.

Diversification Opportunities for Dimensional Targeted and SPDR SP

0.95

Correlation Coefficient

Dimensional Targeted  SPDR SP

Almost no diversification

The 3 months correlation between Dimensional and SPDR is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Targeted Value and SPDR SP 600 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 600 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 600 has no effect on the direction of Dimensional Targeted i.e., Dimensional Targeted and SPDR SP go up and down completely randomly.

Pair Corralation between Dimensional Targeted and SPDR SP

Given the investment horizon of 90 days Dimensional Targeted Value is expected to generate 0.95 times more return on investment than SPDR SP. However, Dimensional Targeted Value is 1.05 times less risky than SPDR SP. It trades about -0.16 of its potential returns per unit of risk. SPDR SP 600 is currently generating about -0.16 per unit of risk. If you would invest  6,043  in Dimensional Targeted Value on November 28, 2024 and sell it today you would lose (537.00) from holding Dimensional Targeted Value or give up 8.89% of portfolio value over 90 days.

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

Dimensional Targeted Value  vs.  SPDR SP 600

Dimensional Targeted

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dimensional Targeted Value has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

SPDR SP 600

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP 600 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Pair Trading with Dimensional Targeted and SPDR SP

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

The idea behind Dimensional Targeted Value and SPDR SP 600 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.