Correlation Between Dimensional Core and IShares Currency
Can any of the company-specific risk be diversified away by investing in both Dimensional Core 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 Core 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 Core Equity and iShares Currency Hedged, you can compare the effects of market volatilities on Dimensional Core 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 Core with a short position of IShares Currency. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and IShares Currency.
Diversification Opportunities for Dimensional Core and IShares Currency
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dimensional and IShares is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity 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 Core 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 Core Equity 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 Core i.e., Dimensional Core and IShares Currency go up and down completely randomly.
Pair Corralation between Dimensional Core and IShares Currency
Given the investment horizon of 90 days Dimensional Core Equity is expected to generate 1.24 times more return on investment than IShares Currency. However, Dimensional Core is 1.24 times more volatile than iShares Currency Hedged. It trades about 0.18 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 3,954 in Dimensional Core Equity on August 28, 2024 and sell it today you would earn a total of 240.00 from holding Dimensional Core Equity or generate 6.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Core Equity vs. iShares Currency Hedged
Performance |
| Timeline |
| Dimensional Core Equity |
| iShares Currency Hedged |
Dimensional Core and IShares Currency Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Core and IShares Currency
The main advantage of trading using opposite Dimensional Core and IShares Currency positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core 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 Core vs. Dimensional International Core | Dimensional Core vs. Dimensional Emerging Core | Dimensional Core vs. Dimensional Core Equity | Dimensional Core vs. Dimensional Small Cap |
| IShares Currency vs. iShares Currency Hedged | IShares Currency vs. iShares Currency Hedged | IShares Currency vs. iShares Currency Hedged | IShares Currency vs. Xtrackers MSCI EAFE |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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