Correlation Between IShares MSCI and Dimensional Core
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and Dimensional 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 IShares MSCI and Dimensional Core 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 Core Equity, you can compare the effects of market volatilities on IShares MSCI and Dimensional 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 IShares MSCI with a short position of Dimensional Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Dimensional Core.
Diversification Opportunities for IShares MSCI and Dimensional Core
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between IShares and Dimensional is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI EAFE and Dimensional Core Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Core Equity 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 Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Core Equity has no effect on the direction of IShares MSCI i.e., IShares MSCI and Dimensional Core go up and down completely randomly.
Pair Corralation between IShares MSCI and Dimensional Core
Given the investment horizon of 90 days iShares MSCI EAFE is expected to under-perform the Dimensional Core. But the etf apears to be less risky and, when comparing its historical volatility, iShares MSCI EAFE is 1.36 times less risky than Dimensional Core. The etf trades about -0.18 of its potential returns per unit of risk. The Dimensional Core Equity is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 3,969 in Dimensional Core Equity on August 30, 2024 and sell it today you would earn a total of 212.00 from holding Dimensional Core Equity or generate 5.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI EAFE vs. Dimensional Core Equity
Performance |
| Timeline |
| iShares MSCI EAFE |
| Dimensional Core Equity |
IShares MSCI and Dimensional Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and Dimensional Core
The main advantage of trading using opposite IShares MSCI and Dimensional Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, Dimensional 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 Dimensional Core will offset losses from the drop in Dimensional Core's long position.| IShares MSCI vs. iShares MSCI Emerging | IShares MSCI vs. iShares MSCI USA | IShares MSCI vs. iShares MSCI Global | IShares MSCI vs. iShares Core MSCI |
| Dimensional Core vs. Dimensional International Core | Dimensional Core vs. Dimensional Emerging Core | Dimensional Core vs. Dimensional Core Equity | Dimensional Core vs. Dimensional Small Cap |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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