Correlation Between Wahed FTSE and Dimensional Targeted

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

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

Diversification Opportunities for Wahed FTSE and Dimensional Targeted

0.78

Correlation Coefficient

Wahed FTSE  Dimensional Targeted

Poor diversification

The 3 months correlation between Wahed and Dimensional is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Wahed FTSE USA and Dimensional Targeted Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Targeted and Wahed FTSE 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 Wahed FTSE USA are associated (or correlated) with Dimensional Targeted. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Targeted has no effect on the direction of Wahed FTSE i.e., Wahed FTSE and Dimensional Targeted go up and down completely randomly.

Pair Corralation between Wahed FTSE and Dimensional Targeted

Given the investment horizon of 90 days Wahed FTSE USA is expected to generate 0.82 times more return on investment than Dimensional Targeted. However, Wahed FTSE USA is 1.22 times less risky than Dimensional Targeted. It trades about 0.05 of its potential returns per unit of risk. Dimensional Targeted Value is currently generating about 0.04 per unit of risk. If you would invest  3,678  in Wahed FTSE USA on February 3, 2024 and sell it today you would earn a total of  1,005  from holding Wahed FTSE USA or generate 27.32% return on investment over 90 days.

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

Wahed FTSE USA  vs.  Dimensional Targeted Value

Wahed FTSE USA

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wahed FTSE USA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Wahed FTSE is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Dimensional Targeted

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Targeted Value are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Dimensional Targeted is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Wahed FTSE and Dimensional Targeted

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

The idea behind Wahed FTSE USA and Dimensional Targeted Value 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 the Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.