Correlation Between Dimensional Targeted and First Trust

Can any of the company-specific risk be diversified away by investing in both Dimensional Targeted and First Trust 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 First Trust 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 First Trust Dow, you can compare the effects of market volatilities on Dimensional Targeted and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Targeted and First Trust.

Diversification Opportunities for Dimensional Targeted and First Trust

0.78

Correlation Coefficient

Dimensional Targeted  First Trust

Poor diversification

The 3 months correlation between Dimensional and First is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Targeted Value and First Trust Dow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Dow 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Dow has no effect on the direction of Dimensional Targeted i.e., Dimensional Targeted and First Trust go up and down completely randomly.

Pair Corralation between Dimensional Targeted and First Trust

Given the investment horizon of 90 days Dimensional Targeted is expected to generate 1.37 times less return on investment than First Trust. In addition to that, Dimensional Targeted is 1.03 times more volatile than First Trust Dow. It trades about 0.1 of its total potential returns per unit of risk. First Trust Dow is currently generating about 0.14 per unit of volatility. If you would invest  6,393  in First Trust Dow on May 8, 2025 and sell it today you would earn a total of  637.00  from holding First Trust Dow or generate 9.96% return on investment over 90 days.

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

Dimensional Targeted Value  vs.  First Trust Dow

Dimensional Targeted

Risk-Adjusted Performance

Fair

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.

First Trust Dow

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Dow are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Dimensional Targeted and First Trust

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

The idea behind Dimensional Targeted Value and First Trust Dow 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.