Correlation Between Vanguard Large and Dimensional ETF
Can any of the company-specific risk be diversified away by investing in both Vanguard Large 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 Vanguard Large and Dimensional ETF 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 ETF Trust, you can compare the effects of market volatilities on Vanguard Large 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 Vanguard Large with a short position of Dimensional ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Large and Dimensional ETF.
Diversification Opportunities for Vanguard Large and Dimensional ETF
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Dimensional is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Large Cap Index 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 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 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 Vanguard Large i.e., Vanguard Large and Dimensional ETF go up and down completely randomly.
Pair Corralation between Vanguard Large and Dimensional ETF
Allowing for the 90-day total investment horizon Vanguard Large Cap Index is expected to under-perform the Dimensional ETF. In addition to that, Vanguard Large is 1.19 times more volatile than Dimensional ETF Trust. It trades about -0.08 of its total potential returns per unit of risk. Dimensional ETF Trust is currently generating about -0.08 per unit of volatility. If you would invest 3,559 in Dimensional ETF Trust on December 4, 2024 and sell it today you would lose (130.00) from holding Dimensional ETF Trust or give up 3.65% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Vanguard Large Cap Index vs. Dimensional ETF Trust
Performance |
Timeline |
Vanguard Large Cap |
Dimensional ETF Trust |
Vanguard Large and Dimensional ETF Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vanguard Large and Dimensional ETF
The main advantage of trading using opposite Vanguard Large and Dimensional ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Large 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.Vanguard Large vs. Vanguard Mid Cap Index | Vanguard Large vs. Vanguard Small Cap Index | Vanguard Large vs. Vanguard Extended Market | Vanguard Large vs. Vanguard Small Cap Growth |
Dimensional ETF vs. Dimensional International High | Dimensional ETF vs. Dimensional Core Equity | Dimensional ETF vs. Dimensional ETF Trust | Dimensional ETF vs. Dimensional International Core |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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