Correlation Between Dimensional Core and Dimensional Targeted

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

By analyzing existing cross correlation between Dimensional Core Equity and Dimensional Targeted Value, you can compare the effects of market volatilities on Dimensional Core and Dimensional Targeted 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 Core with a short position of Dimensional Targeted. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and Dimensional Targeted.

Diversification Opportunities for Dimensional Core and Dimensional Targeted

0.98

Correlation Coefficient

Dimensional Core  Dimensional Targeted

Almost no diversification

The 3 months correlation between Dimensional and Dimensional is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and Dimensional Targeted Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Targeted and Dimensional Core 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 Core Equity are associated (or correlated) with Dimensional Targeted. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Targeted has no effect on the direction of Dimensional Core i.e., Dimensional Core and Dimensional Targeted go up and down completely randomly.

Pair Corralation between Dimensional Core and Dimensional Targeted

Given the investment horizon of 90 days Dimensional Core Equity is expected to generate 0.67 times more return on investment than Dimensional Targeted. However, Dimensional Core Equity is 1.5 times less risky than Dimensional Targeted. It trades about 0.28 of its potential returns per unit of risk. Dimensional Targeted Value is currently generating about 0.18 per unit of risk. If you would invest  3,217  in Dimensional Core Equity on April 30, 2025 and sell it today you would earn a total of  471.00  from holding Dimensional Core Equity or generate 14.64% return on investment over 90 days.

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

Dimensional Core Equity  vs.  Dimensional Targeted Value

Dimensional Core Equity

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Core Equity are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Dimensional Core exhibited solid returns over the last few months and may actually be approaching a breakup point.

Dimensional Targeted

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Targeted Value are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Dimensional Targeted unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dimensional Core and Dimensional Targeted

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

The idea behind Dimensional Core Equity and Dimensional Targeted Value 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.