Correlation Between Dimensional International and Xtrackers MSCI
Can any of the company-specific risk be diversified away by investing in both Dimensional International 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 International 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 International Value and Xtrackers MSCI EAFE, you can compare the effects of market volatilities on Dimensional International 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 International with a short position of Xtrackers MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional International and Xtrackers MSCI.
Diversification Opportunities for Dimensional International and Xtrackers MSCI
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dimensional and Xtrackers is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional International Valu 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 International 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 International Value 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 International i.e., Dimensional International and Xtrackers MSCI go up and down completely randomly.
Pair Corralation between Dimensional International and Xtrackers MSCI
Given the investment horizon of 90 days Dimensional International Value is expected to generate 0.93 times more return on investment than Xtrackers MSCI. However, Dimensional International Value is 1.07 times less risky than Xtrackers MSCI. It trades about -0.16 of its potential returns per unit of risk. Xtrackers MSCI EAFE is currently generating about -0.22 per unit of risk. If you would invest 3,808 in Dimensional International Value on August 30, 2024 and sell it today you would lose (182.00) from holding Dimensional International Value or give up 4.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional International Valu vs. Xtrackers MSCI EAFE
Performance |
| Timeline |
| Dimensional International |
| Xtrackers MSCI EAFE |
Dimensional International and Xtrackers MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional International and Xtrackers MSCI
The main advantage of trading using opposite Dimensional International and Xtrackers MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional International 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.The idea behind Dimensional International Value and Xtrackers MSCI EAFE pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Xtrackers MSCI vs. Fidelity International High | Xtrackers MSCI vs. Global X MSCI | Xtrackers MSCI vs. Xtrackers USD High | Xtrackers MSCI vs. First Trust Dow |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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