Correlation Between Dimensional Marketwide and Dimensional Small

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

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

Diversification Opportunities for Dimensional Marketwide and Dimensional Small

0.98

Correlation Coefficient

Dimensional Marketwide  Dimensional Small

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 Marketwide Value and Dimensional Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Small Cap and Dimensional Marketwide 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 Marketwide Value are associated (or correlated) with Dimensional Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Small Cap has no effect on the direction of Dimensional Marketwide i.e., Dimensional Marketwide and Dimensional Small go up and down completely randomly.

Pair Corralation between Dimensional Marketwide and Dimensional Small

Given the investment horizon of 90 days Dimensional Marketwide is expected to generate 1.37 times less return on investment than Dimensional Small. But when comparing it to its historical volatility, Dimensional Marketwide Value is 1.4 times less risky than Dimensional Small. It trades about 0.12 of its potential returns per unit of risk. Dimensional Small Cap is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  6,281  in Dimensional Small Cap on May 16, 2025 and sell it today you would earn a total of  478.00  from holding Dimensional Small Cap or generate 7.61% return on investment over 90 days.

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

Dimensional Marketwide Value  vs.  Dimensional Small Cap

Dimensional Marketwide

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Marketwide Value are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Dimensional Marketwide is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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 9 (%) 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.

Pair Trading with Dimensional Marketwide and Dimensional Small

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

The idea behind Dimensional Marketwide Value and Dimensional 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.