Correlation Between Dimensional Small and Nuveen Small

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

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

Diversification Opportunities for Dimensional Small and Nuveen Small

0.99

Correlation Coefficient

Dimensional Small  Nuveen Small

No risk reduction

The 3 months correlation between Dimensional and Nuveen is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Small Cap and Nuveen Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Small Cap and Dimensional Small 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 Small Cap are associated (or correlated) with Nuveen Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Small Cap has no effect on the direction of Dimensional Small i.e., Dimensional Small and Nuveen Small go up and down completely randomly.

Pair Corralation between Dimensional Small and Nuveen Small

Given the investment horizon of 90 days Dimensional Small is expected to generate 1.16 times less return on investment than Nuveen Small. But when comparing it to its historical volatility, Dimensional Small Cap is 1.06 times less risky than Nuveen Small. It trades about 0.17 of its potential returns per unit of risk. Nuveen Small Cap is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,685  in Nuveen Small Cap on September 2, 2024 and sell it today you would earn a total of  415.00  from holding Nuveen Small Cap or generate 15.46% return on investment over 90 days.

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

Dimensional Small Cap  vs.  Nuveen Small Cap

Dimensional Small Cap

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Small Cap are ranked lower than 13 (%) 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.

Nuveen Small Cap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Small Cap are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal fundamental indicators, Nuveen Small unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dimensional Small and Nuveen Small

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

The idea behind Dimensional Small Cap and Nuveen 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.