Correlation Between Dimensional Core and Financial Select
Can any of the company-specific risk be diversified away by investing in both Dimensional Core and Financial Select 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 Financial Select 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 Financial Select Sector, you can compare the effects of market volatilities on Dimensional Core and Financial Select 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 Financial Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and Financial Select.
Diversification Opportunities for Dimensional Core and Financial Select
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dimensional and Financial is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and Financial Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Select Sector 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 Financial Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Select Sector has no effect on the direction of Dimensional Core i.e., Dimensional Core and Financial Select go up and down completely randomly.
Pair Corralation between Dimensional Core and Financial Select
Given the investment horizon of 90 days Dimensional Core Equity is expected to generate 0.83 times more return on investment than Financial Select. However, Dimensional Core Equity is 1.2 times less risky than Financial Select. It trades about 0.15 of its potential returns per unit of risk. Financial Select Sector is currently generating about 0.03 per unit of risk. If you would invest 3,651 in Dimensional Core Equity on August 4, 2025 and sell it today you would earn a total of 251.00 from holding Dimensional Core Equity or generate 6.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Core Equity vs. Financial Select Sector
Performance |
| Timeline |
| Dimensional Core Equity |
| Financial Select Sector |
Dimensional Core and Financial Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Core and Financial Select
The main advantage of trading using opposite Dimensional Core and Financial Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core position performs unexpectedly, Financial Select 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 Financial Select will offset losses from the drop in Financial Select's long position.| Dimensional Core vs. iShares SP 500 | Dimensional Core vs. Vanguard Small Cap Growth | Dimensional Core vs. SPDR Dow Jones | Dimensional Core vs. Schwab Broad Market |
| Financial Select vs. iShares Russell Mid Cap | Financial Select vs. iShares Russell 1000 | Financial Select vs. iShares Core MSCI | Financial Select vs. Vanguard Dividend Growth |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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