Correlation Between Dimensional International and SPDR SP

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

By analyzing existing cross correlation between Dimensional International High and SPDR SP 600, you can compare the effects of market volatilities on Dimensional International and SPDR SP 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 International with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional International and SPDR SP.

Diversification Opportunities for Dimensional International and SPDR SP

-0.62

Correlation Coefficient

Dimensional International  SPDR SP

Excellent diversification

The 3 months correlation between Dimensional and SPDR is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional International High and SPDR SP 600 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 600 and Dimensional International 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 International High are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 600 has no effect on the direction of Dimensional International i.e., Dimensional International and SPDR SP go up and down completely randomly.

Pair Corralation between Dimensional International and SPDR SP

Given the investment horizon of 90 days Dimensional International High is expected to generate 0.63 times more return on investment than SPDR SP. However, Dimensional International High is 1.59 times less risky than SPDR SP. It trades about -0.07 of its potential returns per unit of risk. SPDR SP 600 is currently generating about -0.11 per unit of risk. If you would invest  2,553  in Dimensional International High on September 21, 2024 and sell it today you would lose (30.00) from holding Dimensional International High or give up 1.18% of portfolio value over 90 days.

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

Dimensional International High  vs.  SPDR SP 600

Dimensional International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dimensional International High has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Etf's technical indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

SPDR SP 600

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 600 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, SPDR SP is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Dimensional International and SPDR SP

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

The idea behind Dimensional International High and SPDR SP 600 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.