Correlation Between Dimensional Targeted and ProShares Russell

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Can any of the company-specific risk be diversified away by investing in both Dimensional Targeted and ProShares Russell 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 ProShares Russell 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 ProShares Russell 2000, you can compare the effects of market volatilities on Dimensional Targeted and ProShares Russell 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 ProShares Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Targeted and ProShares Russell.

Diversification Opportunities for Dimensional Targeted and ProShares Russell

0.98
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Dimensional and ProShares is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Targeted Value and ProShares Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Russell 2000 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 ProShares Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Russell 2000 has no effect on the direction of Dimensional Targeted i.e., Dimensional Targeted and ProShares Russell go up and down completely randomly.

Pair Corralation between Dimensional Targeted and ProShares Russell

Given the investment horizon of 90 days Dimensional Targeted Value is expected to generate 0.96 times more return on investment than ProShares Russell. However, Dimensional Targeted Value is 1.05 times less risky than ProShares Russell. It trades about 0.16 of its potential returns per unit of risk. ProShares Russell 2000 is currently generating about 0.12 per unit of risk. If you would invest  5,375  in Dimensional Targeted Value on September 4, 2024 and sell it today you would earn a total of  700.00  from holding Dimensional Targeted Value or generate 13.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Dimensional Targeted Value  vs.  ProShares Russell 2000

 Performance 
       Timeline  
Dimensional Targeted 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Targeted Value are ranked lower than 12 (%) 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 January 2025.
ProShares Russell 2000 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Russell 2000 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, ProShares Russell may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Dimensional Targeted and ProShares Russell Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dimensional Targeted and ProShares Russell

The main advantage of trading using opposite Dimensional Targeted and ProShares Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Targeted position performs unexpectedly, ProShares Russell 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 ProShares Russell will offset losses from the drop in ProShares Russell's long position.
The idea behind Dimensional Targeted Value and ProShares Russell 2000 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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