Correlation Between Dimensional International and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both Dimensional International and IShares 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 IShares MSCI 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 MSCI EAFE, you can compare the effects of market volatilities on Dimensional International and IShares 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 IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional International and IShares MSCI.
Diversification Opportunities for Dimensional International and IShares MSCI
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dimensional and IShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional International High and iShares MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares 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 High are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI EAFE has no effect on the direction of Dimensional International i.e., Dimensional International and IShares MSCI go up and down completely randomly.
Pair Corralation between Dimensional International and IShares MSCI
Given the investment horizon of 90 days Dimensional International is expected to generate 4.06 times less return on investment than IShares MSCI. But when comparing it to its historical volatility, Dimensional International High is 1.09 times less risky than IShares MSCI. It trades about 0.01 of its potential returns per unit of risk. iShares MSCI EAFE is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 6,347 in iShares MSCI EAFE on September 3, 2024 and sell it today you would earn a total of 51.00 from holding iShares MSCI EAFE or generate 0.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional International High vs. iShares MSCI EAFE
Performance |
| Timeline |
| Dimensional International |
| iShares MSCI EAFE |
Dimensional International and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional International and IShares MSCI
The main advantage of trading using opposite Dimensional International and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional International position performs unexpectedly, IShares 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 IShares MSCI will offset losses from the drop in IShares MSCI's long position.The idea behind Dimensional International High and iShares 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.
| IShares MSCI vs. FT Vest Equity | IShares MSCI vs. Northern Lights | IShares MSCI vs. Dimensional International High | IShares MSCI vs. JPMorgan Fundamental Data |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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