Correlation Between Dimensional ETF and Dimensional Emerging

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

Diversification Opportunities for Dimensional ETF and Dimensional Emerging

0.59

Correlation Coefficient

Dimensional ETF  Dimensional Emerging

Very weak diversification

The 3 months correlation between Dimensional and Dimensional is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional ETF Trust and Dimensional Emerging Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Emerging Core 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 Dimensional Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Emerging Core has no effect on the direction of Dimensional ETF i.e., Dimensional ETF and Dimensional Emerging go up and down completely randomly.

Pair Corralation between Dimensional ETF and Dimensional Emerging

Given the investment horizon of 90 days Dimensional ETF is expected to generate 3.58 times less return on investment than Dimensional Emerging. But when comparing it to its historical volatility, Dimensional ETF Trust is 2.41 times less risky than Dimensional Emerging. It trades about 0.03 of its potential returns per unit of risk. Dimensional Emerging Core is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,076  in Dimensional Emerging Core on December 4, 2024 and sell it today you would earn a total of  493.00  from holding Dimensional Emerging Core or generate 23.75% return on investment over 90 days.

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

Dimensional ETF Trust  vs.  Dimensional Emerging Core

Dimensional ETF Trust

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional ETF Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, Dimensional ETF is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Dimensional Emerging Core

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dimensional Emerging Core has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Dimensional Emerging is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Dimensional ETF and Dimensional Emerging

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

The idea behind Dimensional ETF Trust and Dimensional Emerging Core 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.