Correlation Between Dimensional Core and IShares Core
Can any of the company-specific risk be diversified away by investing in both Dimensional Core and IShares 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 Dimensional Core and IShares Core 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 iShares Core SP, you can compare the effects of market volatilities on Dimensional Core and IShares 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 Dimensional Core with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and IShares Core.
Diversification Opportunities for Dimensional Core and IShares Core
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Dimensional and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and iShares Core SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core SP 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 IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core SP has no effect on the direction of Dimensional Core i.e., Dimensional Core and IShares Core go up and down completely randomly.
Pair Corralation between Dimensional Core and IShares Core
Given the investment horizon of 90 days Dimensional Core Equity is expected to generate 1.15 times more return on investment than IShares Core. However, Dimensional Core is 1.15 times more volatile than iShares Core SP. It trades about 0.22 of its potential returns per unit of risk. iShares Core SP is currently generating about 0.18 per unit of risk. If you would invest 3,468 in Dimensional Core Equity on August 29, 2024 and sell it today you would earn a total of 167.00 from holding Dimensional Core Equity or generate 4.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Core Equity vs. iShares Core SP
Performance |
| Timeline |
| Dimensional Core Equity |
| iShares Core SP |
Dimensional Core and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Core and IShares Core
The main advantage of trading using opposite Dimensional Core and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core position performs unexpectedly, IShares 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 IShares Core will offset losses from the drop in IShares Core's long position.| Dimensional Core vs. Dimensional Targeted Value | Dimensional Core vs. Dimensional World ex | Dimensional Core vs. Dimensional Small Cap | Dimensional Core vs. Dimensional Core Equity |
| IShares Core vs. iShares Core SP | IShares Core vs. iShares Core SP | IShares Core vs. iShares SP 500 | IShares Core vs. iShares Russell 2000 |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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