Correlation Between Vanguard Large and Dimensional International

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

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

Diversification Opportunities for Vanguard Large and Dimensional International

-0.34

Correlation Coefficient

Vanguard Large  Dimensional International

Very good diversification

The 3 months correlation between Vanguard and Dimensional is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Large Cap Index and Dimensional International High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional International and Vanguard Large 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 Vanguard Large Cap Index are associated (or correlated) with Dimensional International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional International has no effect on the direction of Vanguard Large i.e., Vanguard Large and Dimensional International go up and down completely randomly.

Pair Corralation between Vanguard Large and Dimensional International

Allowing for the 90-day total investment horizon Vanguard Large Cap Index is expected to under-perform the Dimensional International. In addition to that, Vanguard Large is 1.37 times more volatile than Dimensional International High. It trades about -0.08 of its total potential returns per unit of risk. Dimensional International High is currently generating about 0.16 per unit of volatility. If you would invest  2,515  in Dimensional International High on December 30, 2024 and sell it today you would earn a total of  197.00  from holding Dimensional International High or generate 7.83% return on investment over 90 days.

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

Vanguard Large Cap Index  vs.  Dimensional International High

Vanguard Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Large Cap Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Vanguard Large is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Dimensional International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional International High are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical indicators, Dimensional International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Vanguard Large and Dimensional International

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

The idea behind Vanguard Large Cap Index and Dimensional International High 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 Commodity Directory module to find actively traded commodities issued by global exchanges.