Correlation Between World Core and Dimensional 2040

Can any of the company-specific risk be diversified away by investing in both World Core and Dimensional 2040 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 World Core and Dimensional 2040 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between World Core Equity and Dimensional 2040 Target, you can compare the effects of market volatilities on World Core and Dimensional 2040 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 World Core with a short position of Dimensional 2040. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Core and Dimensional 2040.

Diversification Opportunities for World Core and Dimensional 2040

0.78

Correlation Coefficient

World Core  Dimensional 2040

Poor diversification

The 3 months correlation between World and Dimensional is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding World Core Equity and Dimensional 2040 Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional 2040 Target and World Core 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 World Core Equity are associated (or correlated) with Dimensional 2040. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional 2040 Target has no effect on the direction of World Core i.e., World Core and Dimensional 2040 go up and down completely randomly.

Pair Corralation between World Core and Dimensional 2040

Assuming the 90 days horizon World Core Equity is expected to generate 1.33 times more return on investment than Dimensional 2040. However, World Core is 1.33 times more volatile than Dimensional 2040 Target. It trades about 0.22 of its potential returns per unit of risk. Dimensional 2040 Target is currently generating about 0.21 per unit of risk. If you would invest  2,421  in World Core Equity on May 4, 2025 and sell it today you would earn a total of  221.00  from holding World Core Equity or generate 9.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

World Core Equity  vs.  Dimensional 2040 Target

World Core Equity

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in World Core Equity are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, World Core may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Dimensional 2040 Target

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional 2040 Target are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical indicators, Dimensional 2040 may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with World Core and Dimensional 2040

The main advantage of trading using opposite World Core and Dimensional 2040 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Core position performs unexpectedly, Dimensional 2040 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 2040 will offset losses from the drop in Dimensional 2040's long position.

The idea behind World Core Equity and Dimensional 2040 Target 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.