Correlation Between Dimensional International and IShares Core
Can any of the company-specific risk be diversified away by investing in both Dimensional International 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 International 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 International High and iShares Core SP, you can compare the effects of market volatilities on Dimensional International 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 International with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional International and IShares Core.
Diversification Opportunities for Dimensional International and IShares Core
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dimensional and IShares is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional International High 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 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 High 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 International i.e., Dimensional International and IShares Core go up and down completely randomly.
Pair Corralation between Dimensional International and IShares Core
Given the investment horizon of 90 days Dimensional International is expected to generate 1.55 times less return on investment than IShares Core. But when comparing it to its historical volatility, Dimensional International High is 1.26 times less risky than IShares Core. It trades about 0.06 of its potential returns per unit of risk. iShares Core SP is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 4,692 in iShares Core SP on September 12, 2024 and sell it today you would earn a total of 1,928 from holding iShares Core SP or generate 41.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional International High vs. iShares Core SP
Performance |
| Timeline |
| Dimensional International |
| iShares Core SP |
Dimensional International and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional International and IShares Core
The main advantage of trading using opposite Dimensional International and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional International 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 International vs. iShares MSCI Intl | Dimensional International vs. iShares MSCI Intl | Dimensional International vs. iShares Currency Hedged | Dimensional International vs. iShares Edge 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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