Correlation Between Dimensional World and IShares Core
Can any of the company-specific risk be diversified away by investing in both Dimensional World and IShares Core 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 Core 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 Core MSCI, you can compare the effects of market volatilities on Dimensional World and IShares Core 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 Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional World and IShares Core.
Diversification Opportunities for Dimensional World and IShares Core
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Dimensional and IShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional World ex and iShares Core MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core MSCI 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 Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core MSCI has no effect on the direction of Dimensional World i.e., Dimensional World and IShares Core go up and down completely randomly.
Pair Corralation between Dimensional World and IShares Core
Given the investment horizon of 90 days Dimensional World ex is expected to generate 1.02 times more return on investment than IShares Core. However, Dimensional World is 1.02 times more volatile than iShares Core MSCI. It trades about -0.1 of its potential returns per unit of risk. iShares Core MSCI is currently generating about -0.13 per unit of risk. If you would invest 2,603 in Dimensional World ex on August 30, 2024 and sell it today you would lose (51.00) from holding Dimensional World ex or give up 1.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional World ex vs. iShares Core MSCI
Performance |
| Timeline |
| Dimensional World |
| iShares Core MSCI |
Dimensional World and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional World and IShares Core
The main advantage of trading using opposite Dimensional World and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional World position performs unexpectedly, IShares Core 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 Core will offset losses from the drop in IShares Core'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 Core vs. iShares Core SP | IShares Core vs. iShares Core 1 5 | IShares Core vs. iShares Core MSCI | IShares Core vs. iShares Core MSCI |
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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