Correlation Between Vanguard Total and Dimensional Global

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

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

Diversification Opportunities for Vanguard Total and Dimensional Global

0.86

Correlation Coefficient

Vanguard Total  Dimensional Global

Very poor diversification

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

Pair Corralation between Vanguard Total and Dimensional Global

Considering the 90-day investment horizon Vanguard Total Bond is expected to under-perform the Dimensional Global. In addition to that, Vanguard Total is 1.25 times more volatile than Dimensional Global Core. It trades about -0.14 of its total potential returns per unit of risk. Dimensional Global Core is currently generating about -0.05 per unit of volatility. If you would invest  5,450  in Dimensional Global Core on September 14, 2024 and sell it today you would lose (41.00) from holding Dimensional Global Core or give up 0.75% of portfolio value over 90 days.

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

Vanguard Total Bond  vs.  Dimensional Global Core

Vanguard Total Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Total Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Vanguard Total is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Dimensional Global Core

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dimensional Global Core has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Dimensional Global is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Vanguard Total and Dimensional Global

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

The idea behind Vanguard Total Bond and Dimensional Global Core 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.