Correlation Between Total Stock and Dimensional

By analyzing existing cross correlation between Total Stock Market and Dimensional US Core, you can compare the effects of market volatilities on Total Stock and Dimensional 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 Total Stock with a short position of Dimensional. Check out your portfolio center. Please also check ongoing floating volatility patterns of Total Stock and Dimensional.
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Can any of the company-specific risk be diversified away by investing in both Total Stock and Dimensional 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 Total Stock and Dimensional into the same portfolio, which is an essential part of the fundamental portfolio management process.

Diversification Opportunities for Total Stock and Dimensional

0.97
  Correlation Coefficient
Total Stock Market
Dimensional US Core

Almost no diversification

The 3 months correlation between Total and Dimensional is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Total Stock Market and Dimensional US Core in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Dimensional US Core and Total Stock 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 Total Stock Market are associated (or correlated) with Dimensional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional US Core has no effect on the direction of Total Stock i.e., Total Stock and Dimensional go up and down completely randomly.

Pair Corralation between Total Stock and Dimensional

Considering the 90-day investment horizon Total Stock Market is expected to under-perform the Dimensional. In addition to that, Total Stock is 1.08 times more volatile than Dimensional US Core. It trades about -0.59 of its total potential returns per unit of risk. Dimensional US Core is currently generating about -0.53 per unit of volatility. If you would invest  2,909  in Dimensional US Core on October 30, 2021 and sell it today you would lose (271.00)  from holding Dimensional US Core or give up 9.32% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy95.45%
ValuesDaily Returns

Total Stock Market  vs.  Dimensional US Core

 Performance (%) 
      Timeline 
Total Stock Market 
Total Performance
0 of 100
Over the last 90 days Total Stock Market has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Total Price Channel

Dimensional US Core 
Dimensional Performance
0 of 100
Over the last 90 days Dimensional US Core has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Dimensional Price Channel

Total Stock and Dimensional Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Total Stock and Dimensional

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

Total Stock Market

Pair trading matchups for Total Stock

The idea behind Total Stock Market and Dimensional US 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.
Check out your portfolio center. 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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