Correlation Between Dimensional Core and IShares Russell
Can any of the company-specific risk be diversified away by investing in both Dimensional Core and IShares Russell 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 Russell 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 Russell Top, you can compare the effects of market volatilities on Dimensional Core and IShares Russell 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 Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and IShares Russell.
Diversification Opportunities for Dimensional Core and IShares Russell
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 Russell Top in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Russell Top 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 Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Russell Top has no effect on the direction of Dimensional Core i.e., Dimensional Core and IShares Russell go up and down completely randomly.
Pair Corralation between Dimensional Core and IShares Russell
Given the investment horizon of 90 days Dimensional Core is expected to generate 1.09 times less return on investment than IShares Russell. But when comparing it to its historical volatility, Dimensional Core Equity is 1.02 times less risky than IShares Russell. It trades about 0.11 of its potential returns per unit of risk. iShares Russell Top is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 12,538 in iShares Russell Top on September 3, 2024 and sell it today you would earn a total of 2,211 from holding iShares Russell Top or generate 17.63% 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 Russell Top
Performance |
| Timeline |
| Dimensional Core Equity |
| iShares Russell Top |
Dimensional Core and IShares Russell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Core and IShares Russell
The main advantage of trading using opposite Dimensional Core and IShares Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core position performs unexpectedly, IShares Russell 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 Russell will offset losses from the drop in IShares Russell's long position.| Dimensional Core vs. Vanguard Total Stock | Dimensional Core vs. SPDR SP 500 | Dimensional Core vs. iShares Core SP | Dimensional Core vs. Vanguard Dividend Appreciation |
| IShares Russell vs. iShares Russell Top | IShares Russell vs. iShares Russell Top | IShares Russell vs. iShares MSCI USA | IShares Russell vs. iShares MSCI KLD |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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