Correlation Between Alpha Architect and Dimensional ETF

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

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

Diversification Opportunities for Alpha Architect and Dimensional ETF

0.96

Correlation Coefficient

Alpha Architect  Dimensional ETF

Almost no diversification

The 3 months correlation between Alpha and Dimensional is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Architect High and Dimensional ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional ETF Trust and Alpha Architect 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 Alpha Architect High are associated (or correlated) with Dimensional ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional ETF Trust has no effect on the direction of Alpha Architect i.e., Alpha Architect and Dimensional ETF go up and down completely randomly.

Pair Corralation between Alpha Architect and Dimensional ETF

Given the investment horizon of 90 days Alpha Architect High is expected to generate 0.81 times more return on investment than Dimensional ETF. However, Alpha Architect High is 1.23 times less risky than Dimensional ETF. It trades about 0.11 of its potential returns per unit of risk. Dimensional ETF Trust is currently generating about 0.08 per unit of risk. If you would invest  2,251  in Alpha Architect High on April 25, 2025 and sell it today you would earn a total of  36.00  from holding Alpha Architect High or generate 1.6% return on investment over 90 days.

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

Alpha Architect High  vs.  Dimensional ETF Trust

Alpha Architect High

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Architect High are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Alpha Architect is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Dimensional ETF Trust

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional ETF Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Dimensional ETF is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Alpha Architect and Dimensional ETF

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

The idea behind Alpha Architect High and Dimensional ETF Trust 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.