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 Intl and Dimensional International High, 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
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and Dimensional is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Intl and Dimensional International High 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 Intl 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
Given the investment horizon of 90 days iShares MSCI Intl is expected to generate 1.1 times more return on investment than Dimensional International. However, IShares MSCI is 1.1 times more volatile than Dimensional International High. It trades about 0.04 of its potential returns per unit of risk. Dimensional International High is currently generating about 0.03 per unit of risk. If you would invest 3,063 in iShares MSCI Intl on September 12, 2024 and sell it today you would earn a total of 324.00 from holding iShares MSCI Intl or generate 10.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI Intl vs. Dimensional International High
Performance |
| Timeline |
| iShares MSCI Intl |
| 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 Currency Hedged | IShares MSCI vs. iShares MSCI USA | IShares MSCI vs. iShares Edge MSCI | IShares MSCI vs. iShares MSCI Intl |
| 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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