Correlation Between Dimensional International and DOO

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

By analyzing existing cross correlation between Dimensional International Value and DOO, you can compare the effects of market volatilities on Dimensional International and DOO 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 DOO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional International and DOO.

Diversification Opportunities for Dimensional International and DOO

-0.47

Correlation Coefficient

Dimensional International  DOO

Very good diversification

The 3 months correlation between Dimensional and DOO is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional International Valu and DOO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOO 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 Value are associated (or correlated) with DOO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOO has no effect on the direction of Dimensional International i.e., Dimensional International and DOO go up and down completely randomly.

Pair Corralation between Dimensional International and DOO

If you would invest  3,471  in Dimensional International Value on February 29, 2024 and sell it today you would earn a total of  310.00  from holding Dimensional International Value or generate 8.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	0.0%
Values	Daily Returns

Dimensional International Valu  vs.  DOO

Dimensional International

Risk-Adjusted Performance

16 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional International Value are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent forward indicators, Dimensional International may actually be approaching a critical reversion point that can send shares even higher in June 2024.

DOO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DOO has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, DOO is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Dimensional International and DOO

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

The idea behind Dimensional International Value and DOO 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.