Correlation Between Dimensional Marketwide and IShares Core
Can any of the company-specific risk be diversified away by investing in both Dimensional Marketwide 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 Marketwide 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 Marketwide Value and iShares Core SP, you can compare the effects of market volatilities on Dimensional Marketwide 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 Marketwide with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Marketwide and IShares Core.
Diversification Opportunities for Dimensional Marketwide and IShares Core
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dimensional and IShares is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Marketwide Value and iShares Core SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core SP and Dimensional Marketwide 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 Marketwide Value 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 SP has no effect on the direction of Dimensional Marketwide i.e., Dimensional Marketwide and IShares Core go up and down completely randomly.
Pair Corralation between Dimensional Marketwide and IShares Core
Given the investment horizon of 90 days Dimensional Marketwide is expected to generate 1.68 times less return on investment than IShares Core. But when comparing it to its historical volatility, Dimensional Marketwide Value is 1.13 times less risky than IShares Core. It trades about 0.07 of its potential returns per unit of risk. iShares Core SP is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 8,526 in iShares Core SP on September 3, 2024 and sell it today you would earn a total of 5,374 from holding iShares Core SP or generate 63.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Marketwide Value vs. iShares Core SP
Performance |
| Timeline |
| Dimensional Marketwide |
| iShares Core SP |
Dimensional Marketwide and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Marketwide and IShares Core
The main advantage of trading using opposite Dimensional Marketwide and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Marketwide 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.The idea behind Dimensional Marketwide Value and iShares Core SP 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.
| IShares Core vs. iShares Core SP | IShares Core vs. iShares Core SP | IShares Core vs. iShares Russell Top | 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 CEOs Directory module to screen CEOs from public companies around the world.
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