Correlation Between Dimensional Targeted and IShares Russell
Can any of the company-specific risk be diversified away by investing in both Dimensional Targeted and IShares Russell 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 Russell 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 Russell 2000, you can compare the effects of market volatilities on Dimensional Targeted and IShares Russell 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 Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Targeted and IShares Russell.
Diversification Opportunities for Dimensional Targeted and IShares Russell
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dimensional and IShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Targeted Value and iShares Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Russell 2000 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 Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Russell 2000 has no effect on the direction of Dimensional Targeted i.e., Dimensional Targeted and IShares Russell go up and down completely randomly.
Pair Corralation between Dimensional Targeted and IShares Russell
Given the investment horizon of 90 days Dimensional Targeted Value is expected to generate 0.94 times more return on investment than IShares Russell. However, Dimensional Targeted Value is 1.06 times less risky than IShares Russell. It trades about 0.05 of its potential returns per unit of risk. iShares Russell 2000 is currently generating about 0.05 per unit of risk. If you would invest 5,028 in Dimensional Targeted Value on October 20, 2024 and sell it today you would earn a total of 709.00 from holding Dimensional Targeted Value or generate 14.1% 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 Russell 2000
Performance |
| Timeline |
| Dimensional Targeted |
| iShares Russell 2000 |
Dimensional Targeted and IShares Russell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Targeted and IShares Russell
The main advantage of trading using opposite Dimensional Targeted and IShares Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Targeted position performs unexpectedly, IShares Russell 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 Russell will offset losses from the drop in IShares Russell'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 Russell vs. iShares Russell 2000 | IShares Russell vs. iShares Russell 1000 | IShares Russell vs. iShares Russell Mid Cap | IShares Russell vs. iShares Russell 1000 |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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