Correlation Between Dimensional Small and IShares Core
Can any of the company-specific risk be diversified away by investing in both Dimensional Small 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 Small 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 Small Cap and iShares Core MSCI, you can compare the effects of market volatilities on Dimensional Small 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 Small with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Small and IShares Core.
Diversification Opportunities for Dimensional Small and IShares Core
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dimensional and IShares is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Small Cap and iShares Core MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core MSCI 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 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 MSCI has no effect on the direction of Dimensional Small i.e., Dimensional Small and IShares Core go up and down completely randomly.
Pair Corralation between Dimensional Small and IShares Core
Given the investment horizon of 90 days Dimensional Small Cap is expected to generate 1.99 times more return on investment than IShares Core. However, Dimensional Small is 1.99 times more volatile than iShares Core MSCI. It trades about 0.25 of its potential returns per unit of risk. iShares Core MSCI is currently generating about -0.18 per unit of risk. If you would invest 6,449 in Dimensional Small Cap on August 25, 2024 and sell it today you would earn a total of 550.00 from holding Dimensional Small Cap or generate 8.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Small Cap vs. iShares Core MSCI
Performance |
| Timeline |
| Dimensional Small Cap |
| iShares Core MSCI |
Dimensional Small and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Small and IShares Core
The main advantage of trading using opposite Dimensional Small and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Small 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 Small vs. Dimensional Targeted Value | Dimensional Small vs. Dimensional Equity ETF | Dimensional Small vs. Dimensional Core Equity | Dimensional Small vs. Dimensional International Core |
| IShares Core vs. Dimensional Core Equity | IShares Core vs. Dimensional Emerging Core | IShares Core vs. Dimensional Targeted Value | IShares Core vs. Dimensional Small Cap |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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