Correlation Between Dimensional Small and IShares ESG
Can any of the company-specific risk be diversified away by investing in both Dimensional Small and IShares ESG 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 ESG 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 ESG Screened, you can compare the effects of market volatilities on Dimensional Small and IShares ESG 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 ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Small and IShares ESG.
Diversification Opportunities for Dimensional Small and IShares ESG
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 Small Cap and iShares ESG Screened in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Screened 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 ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Screened has no effect on the direction of Dimensional Small i.e., Dimensional Small and IShares ESG go up and down completely randomly.
Pair Corralation between Dimensional Small and IShares ESG
Given the investment horizon of 90 days Dimensional Small is expected to generate 1.03 times less return on investment than IShares ESG. But when comparing it to its historical volatility, Dimensional Small Cap is 1.05 times less risky than IShares ESG. It trades about 0.23 of its potential returns per unit of risk. iShares ESG Screened is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 4,137 in iShares ESG Screened on August 30, 2024 and sell it today you would earn a total of 357.00 from holding iShares ESG Screened or generate 8.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Small Cap vs. iShares ESG Screened
Performance |
| Timeline |
| Dimensional Small Cap |
| iShares ESG Screened |
Dimensional Small and IShares ESG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Small and IShares ESG
The main advantage of trading using opposite Dimensional Small and IShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Small position performs unexpectedly, IShares ESG 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 ESG will offset losses from the drop in IShares ESG'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 ESG vs. iShares ESG Screened | IShares ESG vs. iShares ESG Screened | IShares ESG vs. iShares ESG Advanced | IShares ESG vs. iShares ESG Advanced |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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