Correlation Between Dimensional Global and Vanguard FTSE

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

By analyzing existing cross correlation between Dimensional Global Core and Vanguard FTSE Developed, you can compare the effects of market volatilities on Dimensional Global and Vanguard FTSE 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 Global with a short position of Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Global and Vanguard FTSE.

Diversification Opportunities for Dimensional Global and Vanguard FTSE

0.58

Correlation Coefficient

Dimensional Global  Vanguard FTSE

Very weak diversification

The 3 months correlation between Dimensional and Vanguard is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Global Core and Vanguard FTSE Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Developed and Dimensional Global 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 Global Core are associated (or correlated) with Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Developed has no effect on the direction of Dimensional Global i.e., Dimensional Global and Vanguard FTSE go up and down completely randomly.

Pair Corralation between Dimensional Global and Vanguard FTSE

Given the investment horizon of 90 days Dimensional Global Core is expected to generate 0.33 times more return on investment than Vanguard FTSE. However, Dimensional Global Core is 3.01 times less risky than Vanguard FTSE. It trades about -0.04 of its potential returns per unit of risk. Vanguard FTSE Developed is currently generating about -0.07 per unit of risk. If you would invest  5,433  in Dimensional Global Core on September 18, 2024 and sell it today you would lose (39.00) from holding Dimensional Global Core or give up 0.72% of portfolio value over 90 days.

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

Dimensional Global Core  vs.  Vanguard FTSE Developed

Dimensional Global Core

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dimensional Global Core has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Dimensional Global is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Vanguard FTSE Developed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard FTSE Developed has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Vanguard FTSE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dimensional Global and Vanguard FTSE

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

The idea behind Dimensional Global Core and Vanguard FTSE Developed 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.