Correlation Between Dimensional Small and IShares Currency
Can any of the company-specific risk be diversified away by investing in both Dimensional Small and IShares Currency 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 Small and IShares Currency into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dimensional Small Cap and iShares Currency Hedged, you can compare the effects of market volatilities on Dimensional Small and IShares Currency 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 Small with a short position of IShares Currency. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Small and IShares Currency.
Diversification Opportunities for Dimensional Small and IShares Currency
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Dimensional and IShares is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Small Cap and iShares Currency Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Currency Hedged and Dimensional Small 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 Small Cap are associated (or correlated) with IShares Currency. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Currency Hedged has no effect on the direction of Dimensional Small i.e., Dimensional Small and IShares Currency go up and down completely randomly.
Pair Corralation between Dimensional Small and IShares Currency
Given the investment horizon of 90 days Dimensional Small Cap is expected to generate 2.78 times more return on investment than IShares Currency. However, Dimensional Small is 2.78 times more volatile than iShares Currency Hedged. It trades about 0.32 of its potential returns per unit of risk. iShares Currency Hedged is currently generating about 0.04 per unit of risk. If you would invest 6,391 in Dimensional Small Cap on September 1, 2024 and sell it today you would earn a total of 678.00 from holding Dimensional Small Cap or generate 10.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Small Cap vs. iShares Currency Hedged
Performance |
| Timeline |
| Dimensional Small Cap |
| iShares Currency Hedged |
Dimensional Small and IShares Currency Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Small and IShares Currency
The main advantage of trading using opposite Dimensional Small and IShares Currency positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Small position performs unexpectedly, IShares Currency 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 Currency will offset losses from the drop in IShares Currency's long position.| Dimensional Small vs. Dimensional Targeted Value | Dimensional Small vs. Dimensional Equity ETF | Dimensional Small vs. Dimensional Core Equity | Dimensional Small vs. Dimensional International Core |
| IShares Currency vs. iShares ESG Aggregate | IShares Currency vs. SPDR MSCI Emerging | IShares Currency vs. Aquagold International | IShares Currency vs. Thrivent High Yield |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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