Correlation Between Dimensional Core and Xtrackers MSCI
Can any of the company-specific risk be diversified away by investing in both Dimensional Core and Xtrackers 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 Xtrackers 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 Xtrackers MSCI USA, you can compare the effects of market volatilities on Dimensional Core and Xtrackers 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 Xtrackers MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and Xtrackers MSCI.
Diversification Opportunities for Dimensional Core and Xtrackers MSCI
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dimensional and Xtrackers is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and Xtrackers MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers 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 Xtrackers MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers MSCI USA has no effect on the direction of Dimensional Core i.e., Dimensional Core and Xtrackers MSCI go up and down completely randomly.
Pair Corralation between Dimensional Core and Xtrackers MSCI
Given the investment horizon of 90 days Dimensional Core is expected to generate 1.12 times less return on investment than Xtrackers MSCI. But when comparing it to its historical volatility, Dimensional Core Equity is 1.05 times less risky than Xtrackers MSCI. It trades about 0.09 of its potential returns per unit of risk. Xtrackers MSCI USA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 3,651 in Xtrackers MSCI USA on November 28, 2024 and sell it today you would earn a total of 1,729 from holding Xtrackers MSCI USA or generate 47.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Core Equity vs. Xtrackers MSCI USA
Performance |
| Timeline |
| Dimensional Core Equity |
| Xtrackers MSCI USA |
Dimensional Core and Xtrackers MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Core and Xtrackers MSCI
The main advantage of trading using opposite Dimensional Core and Xtrackers MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core position performs unexpectedly, Xtrackers 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 Xtrackers MSCI will offset losses from the drop in Xtrackers 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 |
| Xtrackers MSCI vs. iShares ESG MSCI | Xtrackers MSCI vs. Xtrackers SP 500 | Xtrackers MSCI vs. iShares MSCI USA | Xtrackers MSCI vs. Vanguard ESG International |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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