Correlation Between Dimensional Targeted and Avantis Small

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

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

Diversification Opportunities for Dimensional Targeted and Avantis Small

1.0

Correlation Coefficient

Dimensional Targeted  Avantis Small

No risk reduction

The 3 months correlation between Dimensional and Avantis is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Targeted Value and Avantis Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis Small Cap and Dimensional Targeted 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 Targeted Value are associated (or correlated) with Avantis Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis Small Cap has no effect on the direction of Dimensional Targeted i.e., Dimensional Targeted and Avantis Small go up and down completely randomly.

Pair Corralation between Dimensional Targeted and Avantis Small

Given the investment horizon of 90 days Dimensional Targeted is expected to generate 1.04 times less return on investment than Avantis Small. In addition to that, Dimensional Targeted is 1.02 times more volatile than Avantis Small Cap. It trades about 0.09 of its total potential returns per unit of risk. Avantis Small Cap is currently generating about 0.1 per unit of volatility. If you would invest  8,443  in Avantis Small Cap on May 3, 2025 and sell it today you would earn a total of  594.00  from holding Avantis Small Cap or generate 7.04% return on investment over 90 days.

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

Dimensional Targeted Value  vs.  Avantis Small Cap

Dimensional Targeted

Risk-Adjusted Performance

OK

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

Avantis Small Cap

Risk-Adjusted Performance

OK

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

Pair Trading with Dimensional Targeted and Avantis Small

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

The idea behind Dimensional Targeted Value and Avantis Small Cap 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.