Correlation Between Dimensional ETF and Quadratic Interest

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

By analyzing existing cross correlation between Dimensional ETF Trust and Quadratic Interest Rate, you can compare the effects of market volatilities on Dimensional ETF and Quadratic Interest 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 ETF with a short position of Quadratic Interest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional ETF and Quadratic Interest.

Diversification Opportunities for Dimensional ETF and Quadratic Interest

0.43

Correlation Coefficient

Dimensional ETF  Quadratic Interest

Very weak diversification

The 3 months correlation between Dimensional and Quadratic is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional ETF Trust and Quadratic Interest Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quadratic Interest Rate and Dimensional ETF 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 ETF Trust are associated (or correlated) with Quadratic Interest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quadratic Interest Rate has no effect on the direction of Dimensional ETF i.e., Dimensional ETF and Quadratic Interest go up and down completely randomly.

Pair Corralation between Dimensional ETF and Quadratic Interest

Given the investment horizon of 90 days Dimensional ETF Trust is expected to under-perform the Quadratic Interest. But the etf apears to be less risky and, when comparing its historical volatility, Dimensional ETF Trust is 1.25 times less risky than Quadratic Interest. The etf trades about -0.32 of its potential returns per unit of risk. The Quadratic Interest Rate is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  1,787  in Quadratic Interest Rate on October 5, 2024 and sell it today you would lose (20.00) from holding Quadratic Interest Rate or give up 1.12% of portfolio value over 90 days.

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

Dimensional ETF Trust  vs.  Quadratic Interest Rate

Dimensional ETF Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dimensional ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Dimensional ETF is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Quadratic Interest Rate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quadratic Interest Rate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Quadratic Interest is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Dimensional ETF and Quadratic Interest

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

The idea behind Dimensional ETF Trust and Quadratic Interest Rate 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.

Check out your portfolio center.

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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.