Correlation Between IShares MSCI and Dimensional ETF
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and Dimensional ETF 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 ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI Intl and Dimensional ETF Trust, you can compare the effects of market volatilities on IShares MSCI and Dimensional ETF 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 ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Dimensional ETF.
Diversification Opportunities for IShares MSCI and Dimensional ETF
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and Dimensional is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Intl and Dimensional ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional ETF Trust 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 Intl are associated (or correlated) with Dimensional ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional ETF Trust has no effect on the direction of IShares MSCI i.e., IShares MSCI and Dimensional ETF go up and down completely randomly.
Pair Corralation between IShares MSCI and Dimensional ETF
Given the investment horizon of 90 days iShares MSCI Intl is expected to under-perform the Dimensional ETF. But the etf apears to be less risky and, when comparing its historical volatility, iShares MSCI Intl is 1.04 times less risky than Dimensional ETF. The etf trades about -0.09 of its potential returns per unit of risk. The Dimensional ETF Trust is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 2,545 in Dimensional ETF Trust on August 30, 2024 and sell it today you would lose (36.00) from holding Dimensional ETF Trust or give up 1.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
iShares MSCI Intl vs. Dimensional ETF Trust
Performance |
| Timeline |
| iShares MSCI Intl |
| Dimensional ETF Trust |
IShares MSCI and Dimensional ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and Dimensional ETF
The main advantage of trading using opposite IShares MSCI and Dimensional ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, Dimensional ETF 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 ETF will offset losses from the drop in Dimensional ETF's long position.| IShares MSCI vs. iShares MSCI Intl | IShares MSCI vs. iShares Edge MSCI | IShares MSCI vs. iShares MSCI Emerging | IShares MSCI vs. iShares MSCI Intl |
| Dimensional ETF vs. Dimensional ETF Trust | Dimensional ETF vs. Dimensional International Value | Dimensional ETF vs. Dimensional International High | Dimensional ETF 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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