Correlation Between Dimensional Small and Invesco KBW

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

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

Diversification Opportunities for Dimensional Small and Invesco KBW

0.89

Correlation Coefficient

Dimensional Small  Invesco KBW

Very poor diversification

The 3 months correlation between Dimensional and Invesco is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Small Cap and Invesco KBW High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco KBW High and Dimensional Small 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 Small Cap are associated (or correlated) with Invesco KBW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco KBW High has no effect on the direction of Dimensional Small i.e., Dimensional Small and Invesco KBW go up and down completely randomly.

Pair Corralation between Dimensional Small and Invesco KBW

Given the investment horizon of 90 days Dimensional Small Cap is expected to generate 1.15 times more return on investment than Invesco KBW. However, Dimensional Small is 1.15 times more volatile than Invesco KBW High. It trades about 0.09 of its potential returns per unit of risk. Invesco KBW High is currently generating about 0.05 per unit of risk. If you would invest  6,255  in Dimensional Small Cap on May 18, 2025 and sell it today you would earn a total of  381.00  from holding Dimensional Small Cap or generate 6.09% return on investment over 90 days.

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

Dimensional Small Cap  vs.  Invesco KBW High

Dimensional Small Cap

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Small Cap are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Dimensional Small may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Invesco KBW High

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco KBW High are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Invesco KBW is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Dimensional Small and Invesco KBW

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

The idea behind Dimensional Small Cap and Invesco KBW 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.

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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..