Correlation Between SPDR Portfolio and Dimensional ETF

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

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

Diversification Opportunities for SPDR Portfolio and Dimensional ETF

1.0

Correlation Coefficient

SPDR Portfolio  Dimensional ETF

No risk reduction

The 3 months correlation between SPDR and Dimensional is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Portfolio TIPS and Dimensional ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional ETF Trust and SPDR Portfolio 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 SPDR Portfolio TIPS are associated (or correlated) with Dimensional ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional ETF Trust has no effect on the direction of SPDR Portfolio i.e., SPDR Portfolio and Dimensional ETF go up and down completely randomly.

Pair Corralation between SPDR Portfolio and Dimensional ETF

Given the investment horizon of 90 days SPDR Portfolio is expected to generate 1.13 times less return on investment than Dimensional ETF. In addition to that, SPDR Portfolio is 1.02 times more volatile than Dimensional ETF Trust. It trades about 0.21 of its total potential returns per unit of risk. Dimensional ETF Trust is currently generating about 0.24 per unit of volatility. If you would invest  4,029  in Dimensional ETF Trust on December 30, 2024 and sell it today you would earn a total of  170.00  from holding Dimensional ETF Trust or generate 4.22% return on investment over 90 days.

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

SPDR Portfolio TIPS  vs.  Dimensional ETF Trust

SPDR Portfolio TIPS

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Portfolio TIPS are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, SPDR Portfolio is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Dimensional ETF Trust

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional ETF Trust are ranked lower than 18 (%) 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.

Pair Trading with SPDR Portfolio and Dimensional ETF

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

The idea behind SPDR Portfolio TIPS and Dimensional ETF Trust 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.