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Optimal Asset Allocation
Generally a diversified portfolio will give you a better overall return --a couple of factors that may address what you are looking at - 1) Correlation - The correlation between your two funds is still very high -- it's partially a function of how global economies are related and many companies are now multi-national.  It may help if you diversified into other types of products.   2) Diversification - Following up from before, you may want to also look into diversifying into some bonds, commodities, reits, etc.  They will have a much smaller correlation with a total domestic stock fund. 3) Returns - I'm not sure if by dominate you mean that it has better overall returns, but the point of diversification is to to get you the highest returns.  It's really the ability to limit the risk for the returns - this really translates to limiting the volatility.  This may mean that overall your max returns could be lower-- ie: maybe VTSAX  gives potential average returns between 3%-11%.  A diversified portfolio may give you potential average returns of 5%-9%.  A similar article debating the merits of 'smart beta ETFs' if you are curious. Hope that helps.