Correlation Between Dimensional 2040 and Japanese Small

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

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

Diversification Opportunities for Dimensional 2040 and Japanese Small

0.86

Correlation Coefficient

Dimensional 2040  Japanese Small

Very poor diversification

The 3 months correlation between Dimensional and Japanese is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional 2040 Target and Japanese Small Pany in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japanese Small Pany and Dimensional 2040 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 2040 Target are associated (or correlated) with Japanese Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japanese Small Pany has no effect on the direction of Dimensional 2040 i.e., Dimensional 2040 and Japanese Small go up and down completely randomly.

Pair Corralation between Dimensional 2040 and Japanese Small

Assuming the 90 days horizon Dimensional 2040 is expected to generate 1.77 times less return on investment than Japanese Small. But when comparing it to its historical volatility, Dimensional 2040 Target is 1.97 times less risky than Japanese Small. It trades about 0.25 of its potential returns per unit of risk. Japanese Small Pany is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  2,492  in Japanese Small Pany on May 28, 2025 and sell it today you would earn a total of  309.00  from holding Japanese Small Pany or generate 12.4% return on investment over 90 days.

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

Dimensional 2040 Target  vs.  Japanese Small Pany

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 19 (%) 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.

Japanese Small Pany

Risk-Adjusted Performance

Solid

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

Pair Trading with Dimensional 2040 and Japanese Small

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

The idea behind Dimensional 2040 Target and Japanese Small Pany 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 Stocks Directory module to find actively traded stocks across global markets.