Correlation Between IShares MSCI and Dimensional International
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and Dimensional International 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 IShares MSCI and Dimensional International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI EAFE and Dimensional International Core, you can compare the effects of market volatilities on IShares MSCI and Dimensional International 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 IShares MSCI with a short position of Dimensional International. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Dimensional International.
Diversification Opportunities for IShares MSCI and Dimensional International
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and Dimensional is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI EAFE and Dimensional International Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional International and IShares MSCI 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 iShares MSCI EAFE are associated (or correlated) with Dimensional International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional International has no effect on the direction of IShares MSCI i.e., IShares MSCI and Dimensional International go up and down completely randomly.
Pair Corralation between IShares MSCI and Dimensional International
Considering the 90-day investment horizon iShares MSCI EAFE is expected to generate 1.12 times more return on investment than Dimensional International. However, IShares MSCI is 1.12 times more volatile than Dimensional International Core. It trades about 0.37 of its potential returns per unit of risk. Dimensional International Core is currently generating about 0.34 per unit of risk. If you would invest 7,535 in iShares MSCI EAFE on November 3, 2024 and sell it today you would earn a total of 464.00 from holding iShares MSCI EAFE or generate 6.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
iShares MSCI EAFE vs. Dimensional International Core
Performance |
| Timeline |
| iShares MSCI EAFE |
| Dimensional International |
IShares MSCI and Dimensional International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and Dimensional International
The main advantage of trading using opposite IShares MSCI and Dimensional International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, Dimensional International 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 Dimensional International will offset losses from the drop in Dimensional International's long position.| IShares MSCI vs. iShares MSCI Emerging | IShares MSCI vs. iShares Core Aggregate | IShares MSCI vs. iShares Russell 2000 | IShares MSCI vs. iShares MSCI Japan |
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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