Correlation Between Dimensional Targeted and IShares SP
Can any of the company-specific risk be diversified away by investing in both Dimensional Targeted and IShares SP 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 Targeted and IShares SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dimensional Targeted Value and iShares SP Small Cap, you can compare the effects of market volatilities on Dimensional Targeted and IShares SP 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 Targeted with a short position of IShares SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Targeted and IShares SP.
Diversification Opportunities for Dimensional Targeted and IShares SP
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 Targeted Value and iShares SP Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP Small and Dimensional Targeted 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 Targeted Value are associated (or correlated) with IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP Small has no effect on the direction of Dimensional Targeted i.e., Dimensional Targeted and IShares SP go up and down completely randomly.
Pair Corralation between Dimensional Targeted and IShares SP
Given the investment horizon of 90 days Dimensional Targeted is expected to generate 1.23 times less return on investment than IShares SP. But when comparing it to its historical volatility, Dimensional Targeted Value is 1.0 times less risky than IShares SP. It trades about 0.1 of its potential returns per unit of risk. iShares SP Small Cap is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 9,664 in iShares SP Small Cap on August 27, 2024 and sell it today you would earn a total of 2,141 from holding iShares SP Small Cap or generate 22.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Targeted Value vs. iShares SP Small Cap
Performance |
| Timeline |
| Dimensional Targeted |
| iShares SP Small |
Dimensional Targeted and IShares SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Targeted and IShares SP
The main advantage of trading using opposite Dimensional Targeted and IShares SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Targeted position performs unexpectedly, IShares SP 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 SP will offset losses from the drop in IShares SP's long position.| Dimensional Targeted vs. Dimensional Small Cap | Dimensional Targeted vs. Dimensional Core Equity | Dimensional Targeted vs. Dimensional International Value | Dimensional Targeted vs. Dimensional Equity ETF |
| IShares SP vs. iShares SP Small Cap | IShares SP vs. iShares SP Mid Cap | IShares SP vs. iShares SP Mid Cap | IShares SP vs. iShares SP 500 |
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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