Correlation Between Dimensional Core and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both Dimensional Core and IShares MSCI 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 MSCI 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 MSCI USA, you can compare the effects of market volatilities on Dimensional Core and IShares MSCI 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 MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and IShares MSCI.
Diversification Opportunities for Dimensional Core and IShares MSCI
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 MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI USA 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 MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI USA has no effect on the direction of Dimensional Core i.e., Dimensional Core and IShares MSCI go up and down completely randomly.
Pair Corralation between Dimensional Core and IShares MSCI
Given the investment horizon of 90 days Dimensional Core is expected to generate 1.05 times less return on investment than IShares MSCI. In addition to that, Dimensional Core is 1.13 times more volatile than iShares MSCI USA. It trades about 0.37 of its total potential returns per unit of risk. iShares MSCI USA is currently generating about 0.44 per unit of volatility. If you would invest 14,767 in iShares MSCI USA on September 1, 2024 and sell it today you would earn a total of 1,122 from holding iShares MSCI USA or generate 7.6% 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 MSCI USA
Performance |
| Timeline |
| Dimensional Core Equity |
| iShares MSCI USA |
Dimensional Core and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Core and IShares MSCI
The main advantage of trading using opposite Dimensional Core and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core position performs unexpectedly, IShares MSCI 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 MSCI will offset losses from the drop in IShares MSCI'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 MSCI vs. iShares Equity Factor | IShares MSCI vs. iShares MSCI USA | IShares MSCI vs. iShares MSCI USA | IShares MSCI vs. iShares Edge MSCI |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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