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

0.87

Correlation Coefficient

Vanguard Large  Dimensional ETF

Very poor diversification

The 3 months correlation between Vanguard and Dimensional is 0.87. 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 1.17 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 -0.04 per unit of volatility. If you would invest  3,371  in Dimensional ETF Trust on December 29, 2024 and sell it today you would lose (88.00) from holding Dimensional ETF Trust or give up 2.61% of portfolio value over 90 days.

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

Vanguard Large Cap Index  vs.  Dimensional ETF Trust

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 ETF Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dimensional ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical 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 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.

The idea behind Vanguard Large Cap Index 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.

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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.