Correlation Between DIA and Core

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

By analyzing existing cross correlation between DIA and Core, you can compare the effects of market volatilities on DIA and Core 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 DIA with a short position of Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of DIA and Core.

Diversification Opportunities for DIA and Core

0.8

Correlation Coefficient

DIA  Core

Very poor diversification

The 3 months correlation between DIA and Core is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding DIA and Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core and DIA 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 DIA are associated (or correlated) with Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core has no effect on the direction of DIA i.e., DIA and Core go up and down completely randomly.

Pair Corralation between DIA and Core

Assuming the 90 days trading horizon DIA is expected to generate 1.49 times more return on investment than Core. However, DIA is 1.49 times more volatile than Core. It trades about 0.12 of its potential returns per unit of risk. Core is currently generating about -0.09 per unit of risk. If you would invest  39.00  in DIA on April 14, 2025 and sell it today you would earn a total of  4.00  from holding DIA or generate 10.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

DIA  vs.  Core

DIA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DIA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, DIA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Core

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Core are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Core may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with DIA and Core

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

The idea behind DIA and 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.