Correlation Between Dimensional World and Xtrackers MSCI
Can any of the company-specific risk be diversified away by investing in both Dimensional World and Xtrackers MSCI 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 World and Xtrackers MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dimensional World ex and Xtrackers MSCI EAFE, you can compare the effects of market volatilities on Dimensional World and Xtrackers MSCI 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 World with a short position of Xtrackers MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional World and Xtrackers MSCI.
Diversification Opportunities for Dimensional World and Xtrackers MSCI
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dimensional and Xtrackers is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional World ex and Xtrackers MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers MSCI EAFE and Dimensional World 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 World ex are associated (or correlated) with Xtrackers MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers MSCI EAFE has no effect on the direction of Dimensional World i.e., Dimensional World and Xtrackers MSCI go up and down completely randomly.
Pair Corralation between Dimensional World and Xtrackers MSCI
Given the investment horizon of 90 days Dimensional World ex is expected to under-perform the Xtrackers MSCI. But the etf apears to be less risky and, when comparing its historical volatility, Dimensional World ex is 1.06 times less risky than Xtrackers MSCI. The etf trades about -0.01 of its potential returns per unit of risk. The Xtrackers MSCI EAFE is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 3,078 in Xtrackers MSCI EAFE on September 2, 2024 and sell it today you would lose (5.00) from holding Xtrackers MSCI EAFE or give up 0.16% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional World ex vs. Xtrackers MSCI EAFE
Performance |
| Timeline |
| Dimensional World |
| Xtrackers MSCI EAFE |
Dimensional World and Xtrackers MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional World and Xtrackers MSCI
The main advantage of trading using opposite Dimensional World and Xtrackers MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional World position performs unexpectedly, Xtrackers MSCI 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 Xtrackers MSCI will offset losses from the drop in Xtrackers MSCI's long position.| Dimensional World vs. Dimensional Core Equity | Dimensional World vs. Dimensional Targeted Value | Dimensional World vs. Dimensional International Value | Dimensional World vs. Dimensional Small Cap |
| Xtrackers MSCI vs. iShares ESG Aggregate | Xtrackers MSCI vs. SPDR MSCI Emerging | Xtrackers MSCI vs. Aquagold International | Xtrackers MSCI vs. Thrivent High Yield |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
Other Complementary Tools
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing |