Correlation Between Dimensional World and IShares Currency
Can any of the company-specific risk be diversified away by investing in both Dimensional World 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 World 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 World ex and iShares Currency Hedged, you can compare the effects of market volatilities on Dimensional World 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 World with a short position of IShares Currency. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional World and IShares Currency.
Diversification Opportunities for Dimensional World and IShares Currency
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dimensional and IShares is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional World ex 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 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 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 World i.e., Dimensional World and IShares Currency go up and down completely randomly.
Pair Corralation between Dimensional World and IShares Currency
Given the investment horizon of 90 days Dimensional World ex is expected to under-perform the IShares Currency. In addition to that, Dimensional World is 1.32 times more volatile than iShares Currency Hedged. It trades about -0.12 of its total potential returns per unit of risk. iShares Currency Hedged is currently generating about 0.0 per unit of volatility. If you would invest 3,517 in iShares Currency Hedged on August 25, 2024 and sell it today you would lose (2.00) from holding iShares Currency Hedged or give up 0.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Dimensional World ex vs. iShares Currency Hedged
Performance |
| Timeline |
| Dimensional World |
| iShares Currency Hedged |
Dimensional World and IShares Currency Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional World and IShares Currency
The main advantage of trading using opposite Dimensional World and IShares Currency positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional World 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 World vs. Dimensional Core Equity | Dimensional World vs. Dimensional Targeted Value | Dimensional World vs. Dimensional International Value | Dimensional World vs. Dimensional Small Cap |
| IShares Currency vs. iShares Currency Hedged | IShares Currency vs. iShares Currency Hedged | IShares Currency vs. iShares Currency Hedged |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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