Correlation Between Dimensional 2040 and Us Small

Can any of the company-specific risk be diversified away by investing in both Dimensional 2040 and Us Small 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 2040 and Us Small into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dimensional 2040 Target and Us Small Cap, you can compare the effects of market volatilities on Dimensional 2040 and Us Small 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 2040 with a short position of Us Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional 2040 and Us Small.

Diversification Opportunities for Dimensional 2040 and Us Small

0.77

Correlation Coefficient

Dimensional 2040  Us Small

Poor diversification

The 3 months correlation between Dimensional and DFSTX is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional 2040 Target and Us Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Small Cap and Dimensional 2040 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 2040 Target are associated (or correlated) with Us Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Small Cap has no effect on the direction of Dimensional 2040 i.e., Dimensional 2040 and Us Small go up and down completely randomly.

Pair Corralation between Dimensional 2040 and Us Small

Assuming the 90 days horizon Dimensional 2040 is expected to generate 1.65 times less return on investment than Us Small. But when comparing it to its historical volatility, Dimensional 2040 Target is 2.16 times less risky than Us Small. It trades about 0.1 of its potential returns per unit of risk. Us Small Cap is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,004  in Us Small Cap on October 21, 2024 and sell it today you would earn a total of  1,040  from holding Us Small Cap or generate 25.97% return on investment over 90 days.

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

Dimensional 2040 Target  vs.  Us Small Cap

Dimensional 2040 Target

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dimensional 2040 Target has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical indicators, Dimensional 2040 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Us Small Cap

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Us Small Cap are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Us Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dimensional 2040 and Us Small

The main advantage of trading using opposite Dimensional 2040 and Us Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional 2040 position performs unexpectedly, Us Small 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 Us Small will offset losses from the drop in Us Small's long position.

The idea behind Dimensional 2040 Target and Us Small Cap 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.