Correlation Between Dimensional Core and First Trust
Can any of the company-specific risk be diversified away by investing in both Dimensional Core and First Trust 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 Core and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dimensional Core Equity and First Trust TCW, you can compare the effects of market volatilities on Dimensional Core and First Trust 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 Core with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and First Trust.
Diversification Opportunities for Dimensional Core and First Trust
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dimensional and First is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and First Trust TCW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust TCW and Dimensional Core 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 Core Equity are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust TCW has no effect on the direction of Dimensional Core i.e., Dimensional Core and First Trust go up and down completely randomly.
Pair Corralation between Dimensional Core and First Trust
Given the investment horizon of 90 days Dimensional Core Equity is expected to generate 2.89 times more return on investment than First Trust. However, Dimensional Core is 2.89 times more volatile than First Trust TCW. It trades about 0.1 of its potential returns per unit of risk. First Trust TCW is currently generating about 0.26 per unit of risk. If you would invest 3,601 in Dimensional Core Equity on July 15, 2025 and sell it today you would earn a total of 160.00 from holding Dimensional Core Equity or generate 4.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Core Equity vs. First Trust TCW
Performance |
| Timeline |
| Dimensional Core Equity |
| First Trust TCW |
Dimensional Core and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Core and First Trust
The main advantage of trading using opposite Dimensional Core and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Dimensional Core vs. Dimensional Targeted Value | Dimensional Core vs. Dimensional World ex | Dimensional Core vs. Dimensional Small Cap | Dimensional Core vs. Dimensional Core Equity |
| First Trust vs. First Trust Low | First Trust vs. First Trust Enhanced | First Trust vs. First Trust Tactical | First Trust vs. First Trust Managed |
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 the Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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