Correlation Between Listed Funds and Dimensional Core

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

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

Diversification Opportunities for Listed Funds and Dimensional Core

0.53

Correlation Coefficient

Listed Funds  Dimensional Core

Very weak diversification

The 3 months correlation between Listed and Dimensional is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Listed Funds Trust and Dimensional Core Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Core Equity and Listed Funds 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 Listed Funds Trust are associated (or correlated) with Dimensional Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Core Equity has no effect on the direction of Listed Funds i.e., Listed Funds and Dimensional Core go up and down completely randomly.

Pair Corralation between Listed Funds and Dimensional Core

Given the investment horizon of 90 days Listed Funds Trust is expected to generate 0.79 times more return on investment than Dimensional Core. However, Listed Funds Trust is 1.26 times less risky than Dimensional Core. It trades about 0.04 of its potential returns per unit of risk. Dimensional Core Equity is currently generating about -0.04 per unit of risk. If you would invest  3,365  in Listed Funds Trust on December 2, 2024 and sell it today you would earn a total of  46.00  from holding Listed Funds Trust or generate 1.37% return on investment over 90 days.

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

Listed Funds Trust  vs.  Dimensional Core Equity

Listed Funds Trust

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Listed Funds Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Listed Funds is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Dimensional Core Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dimensional Core Equity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Dimensional Core is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Listed Funds and Dimensional Core

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

The idea behind Listed Funds Trust and Dimensional Core Equity 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.