Correlation Between SPDR Portfolio and Dimensional Small

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

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

Diversification Opportunities for SPDR Portfolio and Dimensional Small

1.0

Correlation Coefficient

SPDR Portfolio  Dimensional Small

No risk reduction

The 3 months correlation between SPDR and Dimensional is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Portfolio SP 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 SPDR Portfolio 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 SPDR Portfolio SP 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 SPDR Portfolio i.e., SPDR Portfolio and Dimensional Small go up and down completely randomly.

Pair Corralation between SPDR Portfolio and Dimensional Small

Given the investment horizon of 90 days SPDR Portfolio is expected to generate 1.05 times less return on investment than Dimensional Small. In addition to that, SPDR Portfolio is 1.07 times more volatile than Dimensional Small Cap. It trades about 0.18 of its total potential returns per unit of risk. Dimensional Small Cap is currently generating about 0.2 per unit of volatility. If you would invest  5,780  in Dimensional Small Cap on April 30, 2025 and sell it today you would earn a total of  813.00  from holding Dimensional Small Cap or generate 14.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

SPDR Portfolio SP  vs.  Dimensional Small Cap

SPDR Portfolio SP

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Portfolio SP are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, SPDR Portfolio displayed solid returns over the last few months and may actually be approaching a breakup point.

Dimensional Small Cap

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Small Cap are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Dimensional Small unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPDR Portfolio and Dimensional Small

The main advantage of trading using opposite SPDR Portfolio and Dimensional Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Portfolio 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 SPDR Portfolio SP 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.