Correlation Between IShares SP and Dimensional ETF
Can any of the company-specific risk be diversified away by investing in both IShares SP 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 SP 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 SP 500 and Dimensional ETF Trust, you can compare the effects of market volatilities on IShares SP 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 SP with a short position of Dimensional ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and Dimensional ETF.
Diversification Opportunities for IShares SP and Dimensional ETF
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and Dimensional is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 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 SP 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 SP 500 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 SP i.e., IShares SP and Dimensional ETF go up and down completely randomly.
Pair Corralation between IShares SP and Dimensional ETF
Considering the 90-day investment horizon IShares SP is expected to generate 1.51 times less return on investment than Dimensional ETF. But when comparing it to its historical volatility, iShares SP 500 is 1.03 times less risky than Dimensional ETF. It trades about 0.11 of its potential returns per unit of risk. Dimensional ETF Trust is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 5,069 in Dimensional ETF Trust on August 26, 2024 and sell it today you would earn a total of 1,730 from holding Dimensional ETF Trust or generate 34.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 80.48% |
| Values | Daily Returns |
iShares SP 500 vs. Dimensional ETF Trust
Performance |
| Timeline |
| iShares SP 500 |
| Dimensional ETF Trust |
IShares SP and Dimensional ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SP and Dimensional ETF
The main advantage of trading using opposite IShares SP and Dimensional ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP 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 SP vs. iShares SP 500 | IShares SP vs. iShares SP Mid Cap | IShares SP vs. iShares SP Small Cap | IShares SP vs. iShares SP Mid Cap |
| Dimensional ETF vs. BlackRock ETF Trust | Dimensional ETF vs. Rbb Fund | Dimensional ETF vs. Virtus ETF Trust | Dimensional ETF vs. Amplify CWP Enhanced |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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