Correlation Between Dimensional ETF and Dimensional International

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

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

Diversification Opportunities for Dimensional ETF and Dimensional International

0.6

Correlation Coefficient

Dimensional ETF  Dimensional International

Poor diversification

The 3 months correlation between Dimensional and Dimensional is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional ETF Trust and Dimensional International Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional International and Dimensional ETF 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 ETF Trust are associated (or correlated) with Dimensional International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional International has no effect on the direction of Dimensional ETF i.e., Dimensional ETF and Dimensional International go up and down completely randomly.

Pair Corralation between Dimensional ETF and Dimensional International

Given the investment horizon of 90 days Dimensional ETF Trust is expected to under-perform the Dimensional International. In addition to that, Dimensional ETF is 1.31 times more volatile than Dimensional International Core. It trades about -0.16 of its total potential returns per unit of risk. Dimensional International Core is currently generating about -0.17 per unit of volatility. If you would invest  2,710  in Dimensional International Core on August 29, 2024 and sell it today you would lose (75.00) from holding Dimensional International Core or give up 2.77% of portfolio value over 90 days.

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

Dimensional ETF Trust  vs.  Dimensional International Core

Dimensional ETF Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dimensional ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Dimensional ETF is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Dimensional International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dimensional International Core has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Dimensional International is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Dimensional ETF and Dimensional International

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

The idea behind Dimensional ETF Trust and Dimensional International Core 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.