Correlation Between Dow Jones and Dimensional ETF
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Dimensional ETF 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 Dow Jones and Dimensional ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Dimensional ETF Trust, you can compare the effects of market volatilities on Dow Jones and Dimensional ETF 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 Dow Jones with a short position of Dimensional ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Dimensional ETF.
Diversification Opportunities for Dow Jones and Dimensional ETF
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and Dimensional is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Dimensional ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional ETF Trust and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Dimensional ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional ETF Trust has no effect on the direction of Dow Jones i.e., Dow Jones and Dimensional ETF go up and down completely randomly.
Pair Corralation between Dow Jones and Dimensional ETF
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.08 times less return on investment than Dimensional ETF. But when comparing it to its historical volatility, Dow Jones Industrial is 1.07 times less risky than Dimensional ETF. It trades about 0.18 of its potential returns per unit of risk. Dimensional ETF Trust is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 2,852 in Dimensional ETF Trust on May 31, 2025 and sell it today you would earn a total of 247.00 from holding Dimensional ETF Trust or generate 8.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 98.41% |
| Values | Daily Returns |
Dow Jones Industrial vs. Dimensional ETF Trust
Performance |
| Timeline |
Dow Jones and Dimensional ETF Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Dimensional ETF Trust
Pair trading matchups for Dimensional ETF
Pair Trading with Dow Jones and Dimensional ETF
The main advantage of trading using opposite Dow Jones and Dimensional ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Dimensional ETF 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 ETF will offset losses from the drop in Dimensional ETF's long position.| Dow Jones vs. Griffon | Dow Jones vs. Western Copper and | Dow Jones vs. Hudson Technologies | Dow Jones vs. Kaiser Aluminum |
| Dimensional ETF vs. Dimensional ETF Trust | Dimensional ETF vs. Dimensional ETF Trust | Dimensional ETF vs. Dimensional International Value | Dimensional ETF vs. Dimensional ETF Trust |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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